FINANCIAL FOCUS: Not investing carries some risk, too

Joe Faulk

Joe Faulk

Published: Tuesday, August 19, 2014 at 03:51 PM.

You’ve no doubt heard about the risks associated with investing. (This investment carries this type of risk, while that investment carries another one.) And it is certainly true that all investments involve some form of risk.

But what about not investing? Isn’t there some risk associated with that, too?

In fact, by staying on the investment sidelines — or at least by avoiding long-term, growth-oriented investments — you may incur several risks.

Consider this:

You might not keep up with inflation. If you put all your money under the proverbial “mattress" — or, more realistically, you keep it all in “cash” instruments and very short-term investments, you might think you are “playing it safe.” After all, you might reason, your principal is protected, so even if you don’t really make any money, you’re not losing it, either.

But that’s not strictly true, because if your money is in investment vehicles that don’t even keep up with inflation, you can lose ground.

Even at a relatively mild 3 percent annual inflation rate, your purchasing power will decline by about half in just 25 years.

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