The hidden cost of cash: what the man who does this for a living says

Ten thousand euros in a current account look like the safest thing in the world. At three percent inflation a year, after twenty years what is left of that purchasing power is 5,438 euros - and nothing at all happened along the way. Nobody made a mistake, nobody stole anything, no bank went under. The money was safe the whole time, but the whole time it was losing value.

Ben Felix, portfolio manager and Chief Investment Officer at Canada’s PWL Capital, argues in a conversation for The Diary of a CEO that cash in an account and quickly remortgaging a house in order to invest are two opposite but equally underrated risks.

To be clear from the start: this is not our advice. We do not know what you should do with your money and we have no business saying so. What follows is what a man who makes his living managing other people’s money says about it, and we are passing it on because risk is rarely discussed this directly here. The decision stays yours, and it deserves to be thought through calmly rather than in passing.

The first thing Felix talks about is the sense of calm that comes with cash. His argument is simple: leaving money in an account is a decision too, and the only one where you know in advance that you are losing. The loss starts on day one and never pauses.

The second risk grows straight out of that realisation. Someone works out that their money is losing value, decides to act, and the paid-off house goes back under a mortgage - and that money goes into another property or into shares. On paper it looks good: you invest the borrowed money at a higher return than the interest, and the difference is yours. Felix warns that the arithmetic only holds if you last to the end. When an investment falls by a third and the repayment still lands on the first of every month, most people sell at the bottom, and a loss that was temporary becomes permanent. Leverage therefore raises not only gain and loss but pressure, and what is staked in that game is not a portfolio but the house you live in.

On cryptocurrencies he is brief and blunt. Bitcoin came out of computing circles as a technical solution for payment without an intermediary, and as such he finds it interesting - but as an investment he files it under pure speculation, and says he does not buy it himself. The same goes for thematic funds aimed at artificial intelligence, space or green energy. His observation there is uncomfortably concrete: such funds are launched precisely when prices are at their peak and the media noise is loudest, because that is when they sell best. Whoever buys in then has bought at the peak of the attention - which is nearly always the peak of the price too. What follows is the long way down the same curve, and that is usually where people give up, near the bottom.

Behind all of this sits a pattern the economist Carlota Perez traced across two hundred years of technological revolutions. The steam engine, the railway, the car, the internet, now artificial intelligence - the same curve every time. Financial capital first builds a mania, prices take off, then comes the sobering up and the companies without real revenue go under. What survives the clear-out is usually the thing that actually works - the railway stayed even after the companies that built it went under. When the first cash machines were installed, everyone assumed bank tellers were finished; the cost of running a branch fell, more branches opened, and the number of tellers went up.

What Felix offers as an answer is a broadly diversified index fund tracking the whole global economy, with low fees. His argument is not that this is the best thing available, but that you are buying the future cash flows of thousands of companies at once, so you never need to know which of them will make it. The market, he says, already prices in everything publicly known, so buying something merely because it is popular rarely gives you an edge.

Every figure here comes from a North American context, with its taxes, its retirement accounts and its costs - but the underlying mechanics do not change at the border. Inflation eats purchasing power in Zagreb exactly as it does in Toronto, the repayment lands on the first of the month either way, and a fund launched at the peak of the noise sells just as well here. The numbers differ; the machinery does not.