Cash is the worst way to store wealth. To understand why, it’s essential to grasp the nature of fiat currency. Unlike the gold standard—where currency was backed by a tangible asset like gold—fiat currency has no intrinsic value. Governments are free to print money at will, and in a fiat-based economy, inflation is intentionally created to stimulate economic growth.
Because of this, cash consistently loses purchasing power over time. Even under “healthy” inflation—typically targeted at 2–3% annually—most savings accounts fail to provide returns that outpace inflation unless you’re willing to sacrifice liquidity for long-term commitments. In practical terms, holding cash is a guaranteed way to lose value. This reality becomes especially clear when a significant portion of your income is generated through investments: the utility of cash diminishes further when capital is working for you elsewhere.
So why prioritize investment income? To answer that, we need to look at how corporate America handles money. Publicly traded companies are required to file Form 10-K with the SEC, providing a transparent look into their financial strategies. Companies like Amazon and Google manage capital through a mix of short- and long-term loans and carefully monitor metrics like the debt-to-equity ratio.
The debt-to-equity ratio measures how much a company borrows relative to its assets. A higher ratio implies greater financial risk, while a lower ratio suggests more conservative leverage and resilience in adverse conditions. But here’s the insight: success isn’t about accumulating a static pile of cash in a savings account—it’s about access to liquidity when needed.
How do you increase your access to cash? By building valuable assets and borrowing against them. This strategy is not only smart—it’s supported by U.S. tax laws and economic policy. The government incentivizes the reinvestment of capital by favoring those who keep money circulating in the economy. As long as your capital remains invested, you’re often not taxed on the gains. This is where a solid understanding of realized vs. unrealized gains becomes incredibly valuable.
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