What does it mean when you move your investments to cash?

When people say they are moving their investments to cash, or keeping cash on hand, what does this mean exactly? Are they moving cash to a money market account? Letting it sit in their trading account? Bank account? Is this a good idea?

Banking, Investing
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August 2017
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This is a great question.

Typically when people say they are "moving to cash", this is a strategy when they feel the markets are headed to a decline.  They would go ahead and sell investments and keep this money in cash until such time they feel it is ideal to re-enter the markets.

"Moving to cash" can mean different things to different people.  Some investors will simply have the funds sit in cash in their trading or investment accounts.  This could either be in the form of a money market holding, true cash in their account or an FDIC insured deposit account.  Depending on the brokerage firm that you hold your assets with will dictate what options would exist for you within your account.

In addition to the above, some investors will remove the funds from their brokerage account all together and move the funds to a bank account instead.

Whether this is a a good idea or not would depend on your personal situation.  Typically, most investors are not savy enough (and neither are most advisors) to determine when to exit and enter the markets.  Should you have a long term time horizon, 10 years plus, moving to cash may not make sense for you.  You may get out of the markets and avoid some of a decline (you will never avoid it all) but when do you re-eneter the markets.  Many times investors will miss some of the rebound and reinvest their cash too late.

These are great questions and I would recommend you hire a fiduciary advisor to help you navigate this as best you can based upon your own facts and circumstances.  Best of luck!

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