The Risks Of Staying In Cash

By Jack Strulowitz 

When people talk about investing, the word that comes up most often is risk. Risk of losing money. Risk of a market crash. Risk of buying at the top. When the market behaves the way it has over the last few weeks, it reinforces why so many people associate stocks with danger. Prices can swing quickly and headlines are dramatic.

For most passive investors, the market only exists when the headlines tell them it exists. They check their portfolios when the news flashes that the “DOW DROPS 300 POINTS”. Or when they hear the S&P hit a new record. Their emotional connection to the market is triggered by the loudest moments, not the everyday reality of slow, steady business activity.

These dramatic moments make stocks appear risky. But they also distract people from the real, far more damaging risk in their financial lives.

Markets rise and fall, but over long periods companies innovate, adapt, and recover. Inflation, on the other hand, never pauses. It raises the cost of everything you rely on. Groceries. Utilities. Taxes. Tuition. Healthcare. These increases stack on top of each other year after year, meaning today’s higher prices become the starting point for tomorrow’s.

Cash feels stable because the number never changes. But what that number can buy steadily declines. Over the last 30 years, inflation has cut the purchasing power of a dollar by 40 percent. You do not notice the loss day to day, but you eventually feel it when your money no longer stretches as far as you expected.

Staying in cash may feel safe, but it guarantees that you fall behind. Investing in the stock market, then, is not the big risk. The real risk is not investing at all.

When you invest in a diversified portfolio, you are not betting on speculation. You are buying ownership in some of the greatest companies in the world. These are established businesses with long histories, strong leadership, powerful brands, and proven profitability. They are built to innovate, adjust, and stay competitive.

When these companies grow, you share in their growth. Over long periods, diversified portfolios have consistently outpaced inflation, which is why investing is one of the most effective ways to preserve your purchasing power and seek long-term growth.

Cash erodes. Strong companies grow. Investing gives you access to that growth.

It is especially important to remember, during volatile periods like the last few weeks, that selling in a down market and sitting in cash may expose investors to more long-term risk than they realize. Selling during a decline turns a temporary drop into a permanent loss. You also remove yourself from the recovery that has historically followed every period of turbulence.

If you stay the course, the highly profitable companies you own have the time they need to rebound. Maybe not every single company, but that is exactly why you diversify. You spread your investments across different industries and sectors so that the strength of many outweighs the weakness of a few.

The recovery is where long term returns come from. You only participate in it if you remain invested.

People often think, “If the market is dropping, why not move to cash now and get back in when it starts going up again?” It sounds simple, but it almost never works.

There is no clear signal for when a decline ends or a recovery begins. There’s no bell that rings when the market has reached the bottom. By the time it feels safe again, the rebound is usually well underway, and history shows that some of the strongest market gains have happened within the first 10 trading days after a decline.

If you sell during a downturn, you lock in the loss. If you wait for things to “look better,” you usually miss the strongest part of the recovery. Even professionals cannot reliably time the exit and the reentry.

Markets move quickly, and recoveries often begin when headlines still look negative.

This is why staying invested through turbulence has consistently outperformed trying to jump in and out. Long-term success comes from participation, not prediction.

Another reason staying invested matters is the rising cost of your later years. Many people still assume retirement is cheap. It is not. It is often the most expensive stage of life.

This is one of the reasons long term perspective matters so much. My role as a financial advisor is not only to manage investments. It is also to help clients stay grounded when emotions are high. When markets fall, even the most educated and intelligent people panic. When markets rise, people get overly confident. In both cases, long term perspective keeps everything aligned.

History is consistent. Investors who stay invested through turbulence tend to build wealth. Those who try to time the market or hide in cash almost always fall behind.

The real risk in today’s world is not market volatility. The real risk is avoiding growth and letting inflation quietly erode your future. Cash feels safe because the number never changes. But the world around you does.

A diversified investment portfolio gives you ownership in resilient, profitable companies that adapt, innovate, and recover over time. When they grow, you benefit from that growth, which may help investors stay ahead of rising costs, especially later in life.

Inflation works against cash. Investing can help you protect your long-term future. n

Jack Strulowitz is a Financial Advisor at Bernath & Rosenberg in Cedarhurst, NY, where he helps high–net worth individuals and families manage their investments and build comprehensive strategies for retirement, tax, and estate planning. For questions or to schedule a consultation, please contact [email protected] or 847-962-3352.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Securities and advisory services offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC.