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Is cash still king (when it is losing value?)
In this short video between Wealthi’s co-founders Peter Esho and Domenic Nesci, they discussed why cash may not always be king.
There is a saying that ‘cash is king’.
But in an environment where inflation is on the rise and interest rate increases are still ongoing, is cash still king?
This may still be debatable and there will always be people who believe in holding cash no matter what.
Cash may have a place in your overall wealth portfolio, but given some of the outstanding returns from various asset classes – properties and stocks – over the past few years, many people wonder about the value of holding cash.
In fact, many people believe in investing most of their wealth in everything but cash. For example, some people invest in gold, silver and other precious metals. They believe those rare resources will appreciate in value as inflation persists.
Then some invest in property – a tangible asset that almost always delivers healthy returns in terms of rental revenue and property price rises over time.
For example, Wealthi clients who invested in properties in Sydney, Melbourne, Canberra and other growth areas over the past two years have seen fantastic price increases. Some who bought off the plan have actually seen around $100K - $200K increase in the value of their properties even before they took possession.
A Wealthi client who bought an apartment in Melbourne saw the value of her property rose by about $120,000 since she signed the contract to buy.
Another property investor who bought in Canberra also reported a similar price rise and a healthy rental revenue due to the demand for affordable accommodation in the nation’s capital.
If you compare this with someone who decided to hold on to their cash (did not invest in property or other assets), most likely the value of their cash would have fallen due to inflation.
“Holding on to cash is like leaking wealth (due to inflation) which is a form of taxation for not investing your money,” Peter said.
Many people may not realise it, but even if you accumulate millions of dollars today, the value of that money will not be the same in say 5-10 years' time.
Watch Peter’s and Domenic’s video and find out more why cash is losing value and what you can do to protect your wealth.
If you have any questions or would like to discuss the Australian property market and and find out where the opportunities are, reach out to the team: