Cost of Staying in Cash

In times of market turbulence, cash can be very comforting. It’s ok to stay in cash with money that you need in the short-run; however, over the long-run it can cost you a lot more than you realize. This table is a great summary that Fidelity created (click here). It demonstrates the cost of missing the best days in the market. If someone invested just $10,000 into the S&P 500 on January 1, 1980 and held onto the investment until December 31, 2018 the account would have grown to $659,591. However, if they tried to time the market and missed the best 5 performing days (i.e. staying in cash), their account value would only be $427,041. That’s incredible! As the number of best days missed increases, the returns suffer immensely. If you miss the best 50 days over this time period your account would have only grown to $57,388.