WSJ on "Money Moves to Make"
The Wall Street Journal writes about "Money Moves to Make If You're Expecting the Fed to Lower Interest Rates." They state, "Playing it safe paid off for investors in 2023 better than it has in years. Now, it could be time to take more risk with your money. Americans piled into the safe, guaranteed return provided by cash and cash-like investments in the past year. Money-market funds and high-yield savings accounts each had inflows with households, adding more than $651 billion to money-market funds in the second quarter compared with last year, according to Federal Reserve data. Driving the decision to take money out of stocks and bonds and into cash was the Fed. A campaign of interest-rate increases from the central bank pushed the returns of money-markets and similar securities higher. In many cases, investors figured grabbing an easy and guaranteed 5% annual return on their money was a no-brainer." The Journal tells us, "On Wednesday the Fed will make a decision on whether to move interest rates and could provide more direction on its plans. While there is no guarantee the Fed is done raising rates or will cut them soon, history suggests it pays to make moves now, before a possible first rate cut." They add, "Cash still has an important role in investment portfolios, advisers said. For example, it is important to keep a few months' worth of expenses before increasing your investments. That said, if your emergency fund is shored up, you can probably afford to put more money into stocks and bonds, Leve said.... Many investors are still keeping too much of their assets in cash, advisers said. Households held 17% of their financial assets in cash or cash-like investments such as money-market funds or certificates of deposits in 2022 -- the highest share since 2012, federal data show.... Regular investors have a poor history of trying to time the market and often pull money out just in time to miss sustained growth. The case for holding stocks long term is that over the past centuries, it has provided the best opportunity for investors to build wealth."
