Put cash to work

18 September 2026, 12:07 UTC Chief Investment Office GWM Investment Research

Strategic: Put cash to work Put cash to work Author: Sagar Khandelwal, Strategist, UBS Switzerland AG

• Why? 1) Recent all-time highs in major stock markets should not deter long-term investors from investing, given that US stocks have outperformed cash in 97% of rolling ten-year periods between 1945 and July of this year. 2) Balanced investing by maintaining a diversified 60/40 portfolio (60% equities, 40% bonds) has proven resilient across market cycles and a consistent outperformer versus cash. 3) Having an intentional plan for both cash and investing can help overcome emotional biases and the false allure of Investors should optimize returns on necessary cash, market timing. retain sufficient liquidity for near-term needs, and phase excess capital into markets to reduce timing risk. Source: Unsplash

For some investors, especially those who hold substantial balanced portfolios (stocks and bonds) following their worst wealth in less liquid assets like a private business or drawdowns. If an investor holds more than this, their excess alternative investments, cash is synonymous with “rainy cash may not be working efficiently toward long-term day fund” or “safety net.” Holding large amounts of cash financial goals. relative to financial assets as a counterbalance may seem appropriate as a fallback plan. Excess cash often sits idle, earning little or no real return, and is vulnerable to inflation erosion. In this context, holding But for some investors, cash is what is left over after other large cash balances can result in negative after-inflation investments have been committed. Or cash is a general fund returns, eroding purchasing power over time. for potential spending or opportunistic investments as yet unknown. In short, cash is held unintentionally, or as an History shows that phasing excess cash into diversified afterthought. portfolios can deliver more robust long-term outcomes. Over 10- and 20-year holding periods, US stocks have In an uncertain world and yet one where we identify multiple beaten cash in 97% and 100% of cases, respectively, compelling investment opportunities across asset classes, between 1945 and July of this year, based on our analysis. By we believe treating cash as a residual may be a mistake. gradually investing excess cash into a mix of stocks, bonds, commodities, and alternatives, investors can reduce the risk Instead, we outline a three-step approach for prudent cash of poor market timing and benefit from market dips and management, one that can both maximize the chances of rebounds. having funds on hand when needed, while also supporting long-term financial goals to protect, preserve, and grow Balanced investing by contrast, such as maintaining a wealth. diversified 60/40 portfolio (60% equities, 40% bonds), has proven resilient across market cycles and a consistent Step 1: Ascertain how much cash to hold, and invest outperformer versus cash. Looking at data from 1992 to the excess July of this year, USD 100 investing in such a combination CIO recommends that investors maintain enough cash to of 60% stocks (S&P 500) and 40% bonds (Intermediate cover 2-5 years of net expected portfolio withdrawals. Treasuries) would be worth roughly six times the value of the This range is based on historical recovery periods for same USD 100 kept in US 1-3 month T-bills.

This report has been prepared by UBS Switzerland AG. Please see important disclaimers and disclosures at the end of the document.

involve settlement time. Investors should also consider the Some investors fear drawdowns, a technical term for peak- credit strength of the bank or fund holdings and avoid to-trough losses, and the time for their portfolio to recover. concentrating too much cash with a single institution. We analyzed a series of US stock and bond portfolios ranging from all equities to all bonds, including adding to Core liquidity (1-3 years). For known expenses or stocks by 10% increments while reducing fixed income by emergency needs further out, investors may have more 10% increments. One way to measure investor discomfort flexibility. after a market…