With stocks tumbling, should I move my money to cash?

The stock market has been in a free-fall for the better part of 2022 with the S&P 500 index down 21% year-to-date. Along the same lines, bonds have decreased in value because interest rates are rising causing bond prices to fall. So with stocks and bonds both falling, many people are asking whether they should sell their investments and move the money to cash. The answer is no. Here’s why;

1) You’re late to the party

It’s a stretch to call it a party, but regardless, it’s too late to move money to cash. Your stocks (and bonds) have lost significant value so cashing them out now would be committing a big investing no-no - selling low. It’s rarely a good idea to sell when your investments are down. Sure, they could go down more, but no one knows where the bottom will be. And once the market hits bottom, it will rally. If your money is sitting in cash you’ll miss all the gains that come with that rally. The best thing to do now is leave your money where it is.

2) Cash is losing it’s purchasing power

Cash may not decline in value the way your stocks have, but it’s still a money loser. You may earn as much as 2% in a high-yield savings account or CD, but with inflation at 8%, you’re essentially losing 6%.

This is a scary time, but don’t make things worse by making an emotional decision with your investments. Hang on to your stocks and enjoy the ride up after the bear market is over.