Cash Isn’t A Compelling Long Term Strategy
In volatile markets, cash can certainly look appealing. In 2008, for example, investing in money market funds, cash and Treasury bonds was the only way to avoid losses. But the reality is that cash simply isn’t going to get us where we want to go.
As the chart below shows, over the long term, these risk-free categories have barely outpaced the rate of inflation. And, of course, after taxes, these safe havens provided far less.
Most of us simply cannot afford to sit on the sidelines indefinitely, so it’s important to remember that risk and potential reward go hand-in-hand. Over the long term, responsible risk taking has been rewarded, despite shorter term periods of losses.