Bob McGovern is in no rush to move his cash.
The 66-year-old retired banker and his wife have about 60% of their nonretirement assets in Treasury bills and money-market funds that are paying yields of around 5%. With plans to buy a second home in a warmer area, they expect to keep it there until the Federal Reserve cuts short-term interest rates to 4% or below.
“Until then, I’m just going to keep it in cash. I like the safety,” said McGovern, of Grosse Pointe Woods, Mich.
Americans have poured money into cash-like investments since the Fed began raising interest rates, driving assets in money-market funds to a record $6.12 trillion earlier this month, according to the Investment Company Institute. Now, Wall Street traders are betting rates have peaked and those investors face a choice: keep sitting on their cash as interest payments shrink, or figure out how to redeploy the money.
Deciding when and how to rebalance a portfolio is challenging even for pros, and depends on factors including a person’s age, savings and expected needs. But staying on the sidelines risks missing out on years of potential gains from holding a broad portfolio of stocks, bonds and other riskier investments.
J.P. Morgan Asset Management calls it the “cash trap.”
Read more here from the Wall Street Journal.
