Investing Strategy
Should You Hold Cash While Waiting for a Market Pullback?
Waiting for a perfect entry can feel safe, but long periods in cash may create performance drag and missed compounding. The right approach depends on your goals and behavior.
Cost of waiting
- Cash may underperform long-term portfolio return assumptions.
- Timing re-entry is difficult and often delayed.
- Missed compounding can become significant over years.
When extra cash can be appropriate
- Near-term spending needs are high.
- Emergency reserves are underfunded.
- You need a short transition buffer before investing.
Practical move: Use intentional cash targets, not vague market-timing hopes.
Cash decision framework
- Define required liquidity by time horizon.
- Invest excess above liquidity target through a set process.
- Review cash level quarterly against plan objectives.
Track Cash Allocation vs Targets