{"id":14027,"date":"2025-03-11T07:09:38","date_gmt":"2025-03-11T14:09:38","guid":{"rendered":"http:\/\/www.marketriders.com\/investing\/?p=14027"},"modified":"2025-03-21T13:15:57","modified_gmt":"2025-03-21T20:15:57","slug":"stressed-by-the-markets-keep-more-cash-on-hand-2","status":"publish","type":"post","link":"https:\/\/www.marketriders.com\/investing\/stressed-by-the-markets-keep-more-cash-on-hand-2\/","title":{"rendered":"Stressed by the Markets? Keep More Cash On Hand"},"content":{"rendered":"\n

Whether this is your first bear market or your fifth (who\u2019s counting?), it can be very stressful to watch your retirement plan balance drop like a rock in a week after months and even years of a steady incline.<\/p>\n\n\n\n

Yet bear markets<\/a> happen. Statistically they last only a few months while bull markets go on for years, but they do happen. And that can affect how we feel about our investments in a drastic way.<\/p>\n\n\n\n

When stocks decline in value, however short the drop, it becomes very easy to second-guess what had seemed like a low-risk bet on equities. Even if you\u2019re diversified<\/a> (good) and pay low fees for your funds (great), it doesn\u2019t take a lot of down to make every choice you made seem like a horrible mistake.<\/p>\n\n\n\n

\"\"
First of all, it\u2019s never a bad choice to buy diversified, low-cost funds. Stocks go up for far longer than then go down and the recoveries after bear markets typically eliminate losses in time.
In fact, while stocks are down you can buy more and lower your cost basis going forward. On the whole that\u2019s a plus, if you have time ahead of you to save and invest.
But declines can be very stressful in the meantime. Nobody wants to have to liquidate a stock or other investment at a low price, yet that\u2019s what sometimes happens when people watch their investments closely in a bear market.
They panic. They presume worse times are ahead. And they take action at the worst moment, selling at the low and locking in permanent losses.
One way to avoid this trap is to balance your portfolio with bonds<\/a>. It\u2019s okay to own less bonds when you are young and can take the ups and downs. But as you get older and near retirement it\u2019s wise to own more in bonds in order to stabilize your returns.
Stress Less<\/strong><\/em>
There\u2019s another way to build a personal shock absorber for bear market times \u2014 hold cash.
Having cash on hand relieves you of any pressure to sell an investment because you must pay for something in the short run, such as a mortgage, car payments or health insurance.
How much cash is a function of your needs month to month. It\u2019s good to target three months of spending as an emergency fund, while some financial planners counsel retired couples to keep up to a year\u2019s worth of spending on hand.
It\u2019s important to consider what is likely to happen to your cash if you keep it in, say, a savings account at your bank. It could lose value. Interest rates are incredibly low and could stay that way for some time.
To avoid damage from inflation<\/a> it can be prudent to seek out a high-yield account and put some of your cash into a diversified, low-cost income fund. Anything you can find that\u2019s liquid or nearly liquid (you can get cash in 48 hours) and pays better than the inflation rate would work, so long as you understand the risk in each product.
Any investment you make brings with it the risk of loss, even investments long considered safe, such as money market funds<\/a>. Nevertheless, it\u2019s important to balance the potential risk of loss in an investment against the certain risk of lost purchasing power due to inflation.

Information presented is for educational purposes only for a broad audience.  The information does not intend to make an offer or solicitation ofor the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and are not guaranteed. MarketRiders (dba Sogotrade Asset Management) has reasonable belief that this marketing does not include any false or material misleading statements or omissions of facts regarding services, investment or client experience. MarketRiders (dba Sogotrade Asset Management) has reasonable belief that the content as a whole will not cause an untrue or misleading implication regarding the adviser\u2019s services, investments or client experiences. Please refer to our <\/em>Firm Brochure (ADV2)<\/em><\/a> for material risks disclosures.<\/em>
Past performance<\/em><\/strong> of specific investment advice should not be relied upon without knowledge of certain circumstances of market events, nature and timing of the investments and relevant constraints of the investment. MarketRiders (dba Sogotrade Asset Management) has presented information in a fair and balanced manner.<\/em>
The opinions<\/em><\/strong> expressed herein are those of the firm and are subject to change without notice. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass.  Any opinions, projections, or forward-looking statements expressed herein are solely those of MarketRiders, may differ from the views or opinions expressed by other areas of the firm, and are only for general informational purposes as of the date indicated.<\/em><\/figcaption><\/figure>\n","protected":false},"excerpt":{"rendered":"

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