The Opportunity Cost of Holding Too Much Cash, Ep #242

When is enough, enough? Many investors have recently found solace in growing their cash reserves, whether in their checking accounts, savings accounts, or certificates of deposit (CDs). With attractive yields and recent market turbulence still fresh in mind, it’s easy to assume that loading up on cash is a safe strategy.

But there’s a hidden cost to keeping more money than you need. Not only does excessive cash limit your growth potential, but it can erode your long-term wealth, all because of a mix of emotional biases, historical events, and overlooked risks.

Outline of This Episode

• [03:56] Artificial anchoring and recency bias can lead to overly cautious investing decisions.
• [09:14] Cash underperforms stocks and bonds long-term.
• [11:30] Market timing is risky; missing the 10 best days can significantly reduce returns.
• [15:10] Optimize cash flow through strategic sales while considering tax efficiency.
• [19:50] Maximize equities in a portfolio for high returns.
• [20:39] Focus on planning goals for the next 5 to 7 years.

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📰 See the full show notes here

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