Daily Gains Letter

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How to Stop Inflation from Burning a Hole in Your Retirement Savings

By for Daily Gains Letter | Aug 12, 2013

Stop Inflation from Burning American investors are sitting on a lot of money. According to the Investment Company Institute, total U.S. money market mutual fund assets for the week ended July 31 came in at $2.612 trillion. Of that total, 65%, or $1.69336 trillion, is attributed to institutional investors, while $918.93 billion belongs to retail investors. (Source: “Money Market Mutual Fund Assets,” ICI.org, August 1, 2013.)

Even though the stock market has been bullish since early 2009, with the S&P 500 advancing around 140%, investors sitting on the sideline remain skeptical. And on one hand, it’s not hard to see why: the financial crisis that led to the Great Recession may have started back in 2007, but the ripple effects are still being felt today.

U.S. unemployment has been above seven percent for over four years, underemployment has been at least 14% since 2009, and the minimum wage hasn’t budged from $7.25 an hour since July 2009. On top of that, personal debt is up, disposable income is a myth, and consumer confidence is down.

Hints that the Federal Reserve could begin tapering its $85.0-billion-per-month bond-buying program have also made global investors jittery, resulting in markets that are increasingly volatile—and for good reason.

On May 22, the Federal Reserve hinted it might scale back its quantitative easing policy. Over the following weeks, the S&P 500 lost 6.5% of its value. After clawing back the losses throughout July, the S&P 500 took another hit in early August after two Federal Reserve Bank presidents said it was possible the bond-buying program could end in September.

For many Americans, risk in the stock and bond markets is … Read More