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Going To Cash

Thinking About Going to Cash? It’s an Uncomfortable Place to Sit

Going to cash is a lot like settling into a really comfy-looking couch. From a distance, the couch appears to be soft, supportive and a great place to rest and recover. But when you actually sit down on the couch that is cash, you learn the hard truth: It’s much too soft and squishy. It’s not at all supportive. And now that you’re there, it’s going to take a lot of extra effort to get yourself up and out.

The overly soft couch is a perfect analogy for the experience of moving your investment money into cash. When you pull money out of investments—particularly during an economically tumultuous time—you think you’ll feel much calmer when you move to cash. But very quickly, you see that cash isn’t all it’s cracked up to be.

Having money in cash just gives you the illusion that your finances are safe. But the longer you sit on the cash couch, the more you actually erode your own financial security.

Moving to cash undermines your financial peace

Think about it: You probably assumed moving money to cash was a temporary strategy. You never really intended to keep all of your funds in a vehicle that might not even beat inflation. But now each and every day, you ask yourself: Should I put my money back in the market today? Tomorrow? Next week? Next month?

Whenever I’ve had a client move significant assets into cash, they later reported that the experience completely destroyed their sense of financial peace. They could never fully relax. They anxiously watched economic indicators, trying to decide on the best time to jump back into investing.

It’s like they parked their cash car on the shoulder of a really busy freeway. Then they had to nervously decide when they could safely pull back into the frenetic flow of traffic (the market).

Cash can be part, but not all, of your investment plan

In reality, the only way to maintain a long-lasting sense of monetary wellbeing is to have a long-term financial plan. Once your plan is in place, you can relax. It’s designed to weather market ups and downs without you having to make any impulsive moves

Your plan includes an ideal asset-allocation approach. Asset allocation, as you know, is a fancy term for how you diversify your investments into the most common investing categories of stocks, bonds and cash/cash-equivalents. Cash can absolutely be part of your portfolio, but rarely should it be the only allocation approach you choose for your money.

Of course, exactly how much of your portfolio you want to invest in cash is a bit of an individual choice. Some folks feel most comfortable having a year or two of living expenses in cash. If they’ve clearly thought out their approach, that much cash is fine.

Other people may feel that having more than two weeks’ worth of expenses sitting in cash means their money isn’t working hard enough. For those investors, less liquidity is the answer.

Ignore the lure of comfortable cash

Here’s when you need to be careful: Do you tend to move to cash whenever you get a little uncomfortable about what’s happening in the economy? If so, you’re falling for that siren song of the cash couch.

Instead, revisit your financial plan and talk to your Wealth Advisor. Remind yourself why you chose the investment allocations you did. Talk again about why it makes sense to keep cash as just a small portion of your overall portfolio.

Then walk away from the lure of that cash couch. I’m willing to bet you’ll be glad you did.

Important disclosure information

Please remember that different types of investments involve varying degrees of risk, including the loss of money invested. Past performance may not be indicative of future results. Therefore, it should not be assumed that future performance of any specific investment or investment strategy, including the investments or investment strategies recommended or undertaken by RegentAtlantic Capital, LLC (“RegentAtlantic”) will be profitable.

Please remember to contact RegentAtlantic if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and services, or if you wish to impose, add, or modify any reasonable restrictions to our investment management services. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review upon request.

This article is not a substitute for personalized advice from RegentAtlantic. This article is current only as of the date on which it was sent. The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed in other businesses and activities of RegentAtlantic. Descriptions of RegentAtlantic’s process and strategies are based on general practice and we may make exceptions in specific cases.

RegentAtlantic does not provide legal or tax advice. Please consult with a legal and or tax professional of your choosing prior to implementing any of the strategies discussed in this article.

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