Weekly Market Recap US labor productivity was soft for Q2, potentially a result of low business investment, which has been a weaker area in the current economic cycle. However, this recovery has had its strong points, notably the employment situation as this week's job openings report demonstrated. Mortgage applications numbers this week pointing to a stronger housing market. We wanted to take some time this week to talk about how we view cash holdings in investment portfolios. Generally, we recommend keeping cash balances low within investment accounts as cash has historically been a poor long-term investment. While cash may appear stable, its value is slowly eaten away by inflation (rising prices) by around 2% a year based on data from recent decades of US history. This results in the nominal rate of return being lower than the actual, or real rate of return being achieved. This apparently small annual impact adds up over time. For example, a dollar in 2016 purchases about 29% less than it did in 2000. The historically slow, but steady, rise in prices over time makes cash worth less in terms of what it can purchase. To put this in perspective, you can think about the cost of a gallon of gas, or the cost of a postage stamp, when you were a child. Likely, both of those prices have risen significantly, while money kept in cash would have remained the same. Therefore the impression that cash appears stable can be misleading. The value of cash in terms of purchasing power tends to slowly decline. Investments such as stocks and bonds can have more significant ups and downs in the shorter term, but historically have delivered returns superior to holding cash over most multi-year periods, particularly when held in combination. This is why we generally avoid material cash allocations for portfolios. In an effort to protect a portfolio, we don't view moving investments to cash as a robust strategy. Disclaimer:
The views expressed are for informational purposes only and are not intended to serve as a forecast, a guarantee of future results, investment recommendations or an offer to buy or sell securities by FutureAdvisor. All expressions of opinion are subject to change without notice in reaction to shifting market, economic political conditions, and as subsequent conditions vary. The investment strategies mentioned are not personalized to your financial circumstances or investment objectives, and differences in account size, the timing of transactions and market conditions prevailing at the time of investment may lead to different results. This material may contain "forward-looking statements": information that is not purely historical in nature. Clients may lose money. Past performance is not indicative of future results. Investments in securities involve the risk of loss. Any tax strategies discussed should not be interpreted as tax advice and do not represent in any manner that the tax consequences detailed will be obtained. Clients should consult with their personal tax advisors regarding the tax consequences of investing. Your Portfolio Update Over the past month your portfolio was up 1.5%, and we have no recommendations at this time to improve it. Congratulations on maintaining one of the best portfolios among all our clients. We will, as always, continue monitoring your account and alerting you if there are actions to take (periodic rebalancing is required, etc). Ways To Improve Your Portfolio | 0 Accounts with Actions | Your portfolio has no recommended actions right now. We'll watch over your investments and alert you with an email when there are actions for you to complete. Sign in to see detailed steps  |  | Action Required - keep your recommendations accurate | | Your financial institution requested additional authentication to keep your investment accounts synchronized to FutureAdvisor. Keeping your accounts synchronized allows FutureAdvisor to monitor and keep you up-to-date on your investments and recommendations. | | Please log in to fix this in your Financial Profile. | | Sign in to see your full dashboard | * All amounts are as of the sent date of this email | 
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