Increase earning potential with a diversified portfolio
When inflation goes up, things become more expensive, and cash loses its purchasing power. Cash investments may result in lower returns—so you run the risk of not meeting your goals. Instead, investing in a portfolio of different asset classes—like stocks and bonds—can help you keep up with inflation by earning more on your savings.
While investing in stocks and bonds can increase your risk, they have a higher potential for returns when compared with cash investments. Figure 1 shows the potential returns from investing in different asset classes. While investing in the stock market is riskier than investing in money market funds, it can lead to higher returns. So while you may think you're playing it safe by being in cash positions, you may be missing out on returns over the long term.
