Sentinel Watch March 19, 2012 Issue

Safe investments

Eric M. Nager

With all the uncertainty in the financial markets over the past few years, investors have become increasingly averse to risk. Many have chosen to park their assets in cash, even in this era of historically low interest rates. There are literally trillions of such dollars on the investment sidelines waiting for opportunity. For many the motivation is that it’s better to be “safe” than to be in an investment that can significantly decline in value. But is this true safety?

Of course there are many good reasons to temporarily put assets into cash. For example, one might be saving for a down payment on a large purchase. But if the motivation is fear of loss, it’s similar to the Bible’s parable of the talents (see Matthew 25:14–30). In that story, three servants are charged with overseeing different portions of their master’s assets. Two invest wisely and turn over their gains to the master upon his return, but one buries his portion in the ground out of fear and is chastised.

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