Cash is king, so we hear, and if you’ve been stockpiling cash over the last few months – you’re not alone! From the beginning of 2018, we watched an already high market peak at the end of January and so far has been a bumpy ride over the last few months. There is a lot of uncertainty among investors but sitting in cash for an extended period of time can be quite worrisome as well.
I hear this all the time! “I have all this cash that I’m not doing anything with. What should I do?” Great question because when you look at this question objectively, we can determine that the act of merely sitting in cash is driven by uncertainty and fear of the future. It can also be because you’re simply too busy and don’t have the time to sit down and figure out a plan of action.
Uncertainty With The Markets
Guess what!?! This is usually how you are going to feel when investing in the market. It is an uncertain place to be. We can listen to economists, corporate executives, day traders, and some of the biggest minds in academia and everyone is going to have their own opinion. That is why there are always buyers in a market AND sellers.
When you break down what has been happening in the markets, take a look back from where we came from. Coming off the financial crisis we had a period of historically low-interest rates and low-interest rate volatility and since then, we have seen the economy strengthen. Unemployment has been low, wages have been rising and the Fed has responded to that by raising interest rates and will more than likely raise rates moderately over this year. Rising rates are not necessarily a bad thing as our economy can fundamentally support those increased rates which is actually really great news! And although we’ve become very comfortable with the low volatility we’ve been able to enjoy, the increased volatility you’ve been experiencing are all signs of a healthy market.
Too Busy To Invest
You’re too busy making money (or spending it) to give any thought as to what you need to do in order to deploy your extra cash. However, you’re not doing yourself any favors. Sure, cash is great for short-term spending needs and an emergency fund, but keeping cash in hopes that it will fund your bigger future goals is a pipe dream.
So, What Do I Do With All My Cash?
If you’re tired of wondering and waiting what to do with all your cash, consider following these steps to evaluate your next best move:
- At the very least, ensure you’re getting a higher yield on your money. With interest rates rising, there are much better interest rates to be had on options such as a High Yield Savings Accounts, CDs, and even a six-month Treasury Bill which is yielding close to 2% as of today. Another option is to consider a short-term bond fund. If you’re still in sort of a paralysis and confused as to what to do, at least you will be earning more interest!
- Review the time-frame you have from this moment until the time you plan on using the money. If your time frame is 2 or 3 years then sure, go ahead and stick to the first option. If you have 5 years, 10 years or more, develop a plan to begin deploying your cash into an investment strategy. This means reviewing your comfort level with volatility and what your ultimate goals are. This may help overcome the initial shock of moving all of your funds at one time.
- Remember, hindsight is always 20/20! It’s easy to look back a year from today and say, “Oh boy! I should’ve been in the market! Look at how much it gained over 2018!” The same can be said about a downturn, “Oh no! I should’ve gotten out of the market in January. It’s done nothing since then but go down!” It’s important to remember that these are very short-term viewpoints which is why we suggest only investing funds that you do not need straight away. What you should be focused on is what your ultimate end goal is, how much risk NEEDS to be taken to reach your goals and whether that matches your WILLINGNESS to take the risk, and setting appropriate expectations of whether you’re likely to reach your goals over a longer time horizon.
Sitting on too much cash simply means you’re sitting on the sidelines and not playing in the game. You can always be doing something different to make your money work harder for you! Whether you’re changing where your cash is being held or moving forward on an investment strategy, you have options. Do something different today!
