In investing, you can have safe present value OR safe future value, but not both!
Part 3 of my Advisor Perspectives series on long-horizon investing shows why long-term Treasury bonds (or better yet, TIPS)–which the last couple years clearly prove are quite risky on a short-term basis–are in fact the risk-free asset for a long-term goal. Less intuitively, cash and short-term bonds, which are very safe on a short-term basis, are just as risky with respect to a long-term goal. This is true even though they never lose value on a present-dollar basis.
A mountain climber and a mystical financial guru illustrate “The Riskiness of ‘Low Risk’ Assets.”
Finally, special thanks to Joe Tomlinson and Michael Finke for their helpful comments on this article series. The final product is much better for their input.
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