Put cash to work

21 August 2026, 09:36 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 committing to markets, given US stocks have beaten cash in 97% of cases 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 market timing. Source: Unsplash

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

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

ranging from all equities to all bonds, including adding to Deposits and short-duration fixed income can serve known stocks by 10% increments. One way to measure investor expenses over the next one to three years. Fixed-term discomfort after a market decline is the longest time it deposits can provide a defined interest rate and maturity, would have taken for a portfolio to not just recover but making them of interest when the amount and timing of a take out a fresh high. We discover that while an all-bond future expense are relatively clear. The trade-off is reduced portfolio's longest recovery time was 4 years and an all- access, with early withdrawal potentially unavailable or equity…