An interesting article about investors carrying too much cash was in today’s Wall Street Journal. There’s nothing in the piece that is inaccurate or misleading; it’s just a little narrow and could use better framing.1
I want to address five elements that put the issue of how much cash you should be carrying into a broader perspective:
1. House Money: Everybody wants to compare the current market boom to the late 90s – I disagree on valuations and bubbliciousness, but allow me to share my experience from that era; people who were not managing money then might not be aware of the history.
I have vivid mid-1990s recollections of clients calling to sell stocks. It was the 14th or 15th year of a 19-year bull market. They wanted to roll out of some highly appreciated equities into real estate – a vacation property or an upgrade to their primary residence. They willingly gave up a few years of future equity returns in exchange for an immediate improvement to their lifestyle.
A reminder for individual investors: you are not hedge fund managers competing in league tables for bragging rights; you are individuals trying to live and enjoy your life, giving your family the best opportunities and experiences you can.
Today, we are 17 years post-GFC bottom; many people are sitting on huge gains. I never have a problem when clients want to take something off the table to make a major purchase that a) they can afford and b) brings them joy.
2. Why Not Bonds? If you’re in your 20s, 30s, or 40s, you’re probably better off in an all-equity portfolio (assuming you have the self-discipline to not panic every drawdown). The anecdote the WSJ starts with is a 75-year-old retiree with 85% equity and 15% money market. It asks, “Why not own some bonds instead of the money market?”
The short answer is certainty. If you are mapping out your annual spend, you know exactly what you have and what it will be when any of those bills come due.
The longer answer is the tradeoff: Are you getting paid enough yield to compensate for any additional risk you assume? SNAXX is a favorite Money Market yielding 3.65%. (0.19% expense ratio). In an era of 3% inflation, you are only slightly ahead.
Investment-grade (IG) bond funds yield ~4.4%; go out 5–10 years and, in exchange for more duration risk, yield ~4.9%. At 10+ years, you are at ~5.4%. The longer the duration, the more sensitive bonds are to changes in interest rates. If you look at Munis, you are getting ~4% – a 6.4% taxable equivalent yield for investors who are high-income and live in a high-tax state.
The trade-off? Most of these funds experienced a lot of volatility in 2024-25. The concern is the timing of when cash is needed into a bond drawdown.2
3. Good Planning: For a 65-year-old+ investor, keeping a modest pile of cash is not the worst thing they can do. Mapping out your liabilities for the year, whether it’s quarterly tax filings, philanthropy, mortgage payments, wedding gifts, or the like, is simply a comfortable form of planning.
If knowing these cash uses are not at risk of a bond fund drawdown; if it makes it easier to budget your annual spending; if all of the above allows you to sleep well at night, then you have your answer to the MM or Bond fund question.
4. My priors: I do not believe individual investors need to wring out every last basis point of yield at the cost of their own comfort levels. Sometimes, we give up rounding errors or returns in exchange for less stress.
Everything in investing (and life) is a series of tradeoffs; we want to make the best decisions we can with limited information about an uncertain future. This includes yields, inflation, and the direction of future interest rates.
5. Embrace Joy: The time to defer gratification is when you are young, with decades of compounding ahead of you.
My favorite stories from advisors and clients are about families who are reluctant to spend because they are nervous, having lived through the Dotcom implosion, the GFC, Flash Crash, COVID, and 2022. But if the numbers say they can easily afford to take the entire extended family to visit the old country, or to buy that vacation property, or to pay for their kids’ first-home down payments or their grandkids’ college, then why the hell not?
What else is the purpose of money if not to live and be joyful in our limited time on this planet?
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If you are the kind of person who wants to squeeze every last basis point of yield out of your cash, then – depending upon your income and tax situation – an intermediate IG Corp or Muni fund makes a lot of sense.
If a few thousand dollars in additional yield over the course of spending down a pile of cash each year isn’t as important as your peace of mind, if it makes you more comfortable, then perhaps a money market fund is the right answer for you. It depends on the specifics of your circumstances, preferences, and individual psychology.
Like so much in this space, there is no one-size-fits-all solution.
The key to making a good cash management decision is understanding the trade-offs and the dollars involved. An informed, thoughtful process that considers all of these factors will lead you to the best decision for you and your individual circumstances.
See also:
Wealth Management Has a $3 Trillion Problem: Investors Are Keeping Too Much Cash
By Miriam Gottfried
WSJ, Aug. 12, 2026
Previously:
Overvalued, Bubble, or Revolution? (July 17, 2026)
__________
1. The best news about this article? At least we are not talking about people sitting with 100s of 1000s of dollars in 0.25% checking accounts…
2. There may be some PTSD following the 16% drawdown in the Bloomberg US Aggregate Bond Index (AGG) in 2022.
