The Opportunity Cost of Holding Cash
Holding cash may seem like a safe harbor in the financial markets, providing liquidity and peace of mind. However, this comfort comes with a hidden price – the potential growth you miss out on when your money isn't working for you. With each passing day, your cash reserves could be foregoing valuable opportunities to earn interest, dividends, and capital gains. Over the long run, money market funds (a proxy for cash) have underperformed other fixed-income allocations. Even short-term fixed-income treasury notes have outperformed cash over the long run.