On It With Offit Newsletter

On it With Offit

by Ben Offit, CFP®


Interesting Tidbits

The U.S. Now Has More Millionaires Than Sweden or Portugal has people. More than 10.2 million households had a net worth of one to five million dollars in 2018, not including the value of their primary residence. 
- Bloomberg, March 13, 2018

A college degree is worth the cost if you earn a degree that translates into the new economy. The average undergrad college degree earner is expected to earn $2.8 million over her lifetime. The average high school only grad, $1.5 million.
- Center on Education

1 in 2 Americans now say they will work past age 65.  This is triple the number that said the same in 1989.
- Center for Retirement

If you want to feel rich, just count all the gifts you have that money can't buy.
-Inspirational Quotes

In not so surprising news, American prefer warm weather and lower taxes. Last year more Americans moved to Florida than any other state, and more left New York than any other state.
- Source: Census Bureau

Plan for what is difficult while it is easy.
- Sun Tzu

Taking drugs and thinking you are happy is like taking a loan and thinking you have money.


Ben Offit, CFP® is featured in Baltimore Magazine as a 2019 Five Star Wealth Manager, for the second consecutive year.

To receive the 2019 Five Star Wealth Manager award, researched and managed by Five Star Professional, a wealth manager must meet 10 objective eligibility and evaluation criteria associated with wealth managers who provide quality services to their clients. 1,759 wealth managers in the Baltimore area were considered for the award. 232 were named in 2018. Five Star Wealth Managers which represents less than 13% of the total wealth managers in the area. Wealth managers do not pay a fee to be considered or placed on the final list of 2018 Five Star Wealth Managers. The Five Star award is not indicative of the wealth manager's future performance.

Ben Offit, CFP® is the President of the Financial Planning Association.  Learn more about our Maryland chapter in our new video.

Is Cash Really King?

The 4th quarter market drop, concluding with the worst December since 1931, had many “investors” fleeing for the exits. The year closed out with several trillion sitting in cash, the most since March 2010.

When we think of risky asset classes, we tend to think of commodities, real estate, stocks, and even some bonds. Cash may be last on the list. Cash, however, has many inherent risks as well, but they aren’t as obvious.

First and foremost, cash is the worst performing asset class in history. Over long periods of time, cash has underperformed all other major asset classes. The more time you spend with a significant portion of your holdings in cash, the higher the probability your portfolio will underperform just about everything.

Second, holding cash for long periods of time practically guarantees that you will not keep up with inflation. Cash guarantees the loss of purchasing power. In essence, your cash becomes worth less and less each year as prices go up and your cash does not. Imagine you put $100,000 in the bank and earn 1% or so a year for 10 years. When you pick up your cash, you may feel pretty good. However, the 1% or so you earned did not keep up with the cost of a stamp, a suit, a candy bar, health care or education (Inflation is one of those things that creeps up on you. (Remember coffee at 25 cents, candy bars for 50 cents?). You may think you made money, but you lost purchasing power.

One reason many “investors” hold cash is to time the market. They do this despite the fact that there has never been a documented, real-world study done by anyone ever showing that moving from the market to cash and back to the market repeatedly works. After all, you need to be right about when to get out, then when to get in, and do it over and over again. On the other hand, there are many real-world studies showing that moving to cash and back does not work and in fact dramatically increases the risk of loss. For a real world example of how harmful market timing can be, just ask anyone that went to cash in early December, scared out by rising rates, China, the U.S. leaving the negotiating table, and the dreaded inverted yield curve. Yes, the market moves sharply down on that news. Unfortunately for those that tried to “sit it out,” the market swiftly adjusted back as the Federal Reserve changed its mind and provided guidance that it would not be raising rates after all, the U.S. and China decided it might be better to talk things through, and that inverted yield curve un-inverted itself. OOPS!!. All kidding aside, this sort of move to cash permanently harms many investors who have spent their entire lives, working tens of thousands of hours to accumulate their savings, only to see a significant chunk of it wiped out due to poor advice, a lack of discipline, or by getting sucked into the hysterical financial media narrative of the day.

So what happens to the investors who stay invested in the broad market instead of attempting to time the market? How many of them have permanently lost money? Zero. Unfortunately, the investor graveyard is full of people who fled to cash for “safety.” When you think of the great investors of all time, like JP Morgan, Templeton, Buffet, etc., you do not find people who go in and out of the market; you find long-term investors who buy more when there is, as Templeton said, “blood in the streets.” Our clients should not be increasing allocations to cash, in fact, where appropriate, clients should put more into the market when the market is down.

Finally, many investors hold cash in the event of financial Armageddon, a situation when the stock market goes to zero or near zero and never recovers. In reality, if we live in a world where Wal-Mart, Nike, McDonalds, Google and the rest of the world’s dominant companies go down and never recover, it will likely accompany a default by the U.S. government on Treasury bonds. How can the U.S. government make its debt payments on its bonds if major U.S. companies have collapsed? Who exactly would be working and paying taxes to cover the debt payments?  In this event, cash is worthless as the FDIC guarantee would essentially mean nothing. If you do not believe America’s major corporations can survive, then the natural conclusion is that the U.S. economic system itself cannot survive. In that event, cash may be the worst asset to own.

Despite all of this, Americans are currently sitting on more than 3 trillion in cash. Of course, the rush to cash started near the stock market bottom last year, at precisely the worst time.

Cash gives people comfort because it does not move around much. It is easy to understand, and it does not “go down.” But there is more to the story than that. While cash brings comfort, it does not keep up with inflation, constantly loses purchasing power, drags down long-term investment returns, and is of no value in the event of a true economic collapse. Keeping short-term reserves on hand is a good idea. Hoarding cash as a long-term investment, not so much.

Source: Peter Mallouk

Offit Advisors
28 E Susquehanna Ave
Towson, MD  21286
Phone + Fax:  410 600 PLAN (7526)
E – BOffit@OffitAdvisors.com
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The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS.  Offit Advisors. is not affiliated with Kestra IS or Kestra AS.