Cash is a drug for investors, redux

Good ideas never die. Here I from a post earlier this year:

I think that “cash is a drug” for most investors. Easy to start, difficult to kick. Always a reason to NOT get back in.

Today in the Wall Street Journal, Corrie Driebusch talks about the cash conundrum in conjunction with the recent bond rout.

It’s double trouble for financial advisers when clients insist on the safety of cash, as some did when the bond market became roiled.

One problem: Cash is sure to lose value to inflation. The other: Once an investor moves into cash, it can be hard to persuade them to put the money back in the markets.

My conclusion from the earlier post still stands:

Market timing is a gateway to cash addiction. One need only look at fund return statistics to see that individual investors have a horrible tendency to buy high and sell low. Have a strategic (or even tactical) asset allocation and stick to it. Let the “professionals” wield cash in an option-like fashion. You have better things to do with your time.

 

 

 

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