{"id":366286,"date":"2025-12-24T16:44:08","date_gmt":"2025-12-24T16:44:08","guid":{"rendered":"https:\/\/www.newsbeep.com\/ca\/366286\/"},"modified":"2025-12-24T16:44:08","modified_gmt":"2025-12-24T16:44:08","slug":"sitting-on-cash-for-2026-why-experts-say-the-safe-option-could-be-your-biggest-risk","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ca\/366286\/","title":{"rendered":"Sitting on cash for 2026? Why experts say the ‘safe’ option could be your biggest risk"},"content":{"rendered":"\n

After a year of uncertainty and volatility, with U.S. tariffs dominating headlines and regular invocations of an \u201cAI bubble<\/a>,\u201d the temptation may exist to seek safety in cash. But experts say the same investing rules apply as always, even with AI stocks\u2019 path still erratic and further trade bumps<\/a> likely ahead in 2026.<\/p>\n

\u201cThe single best way to avoid getting ruined from a market downturn is not to expose yourself to more risk than you can tolerate in the first place,\u201d said Jason Pereira, a senior partner and financial planner at Woodgate Financial.<\/p>\n

\u201cI’m not saying don’t invest \u2014 I’m absolutely saying invest. But the investment decision is not between ‘cash’ and ‘stock.’ That is a fallacy.\u201d<\/p>\n

If anxiety about markets is rising, it isn\u2019t clearly showing up in how Canadian investors are behaving. In an email to Yahoo Finance Canada, Frances Horodelski, who has held senior roles in Canada’s investment industry for decades, says she is not seeing a broad move into cash despite persistent headlines about volatility, geopolitics, and stretched valuations.<\/p>\n

\u201cI wouldn\u2019t put too much stock in people claiming to want cash due to economic uncertainty here,\u201d she said, describing investor behaviour in many cases as leaning more towards \u201call in.\u201d That posture also aligns more closely with market reality. While Canadian economic sentiment remains dour<\/a>, the TSX has quietly held up, with roughly 80 per cent of its components positive year-to-date and strength spread across banks, industrials, and consumer names such as Aritzia, Saputo, and Bombardier.<\/p>\n

Pereira says the gap between perception and reality often comes down to a misunderstanding of volatility itself. Market swings feel destabilizing, but they are not evidence that something is broken. \u201cVolatility is the price you pay for long-term returns in the market,\u201d he said. \u201cNot everybody\u2019s willing to pay that price.\u201d Avoiding volatility entirely, he adds, doesn\u2019t eliminate risk so much as shift it, increasing the odds that investors miss returns when markets move ahead of sentiment.<\/p>\n

When investors do hold cash, Horodelski and Pereira both suggest it is usually functional \u2014 money parked for liquidity or imminent purchases rather than a strategic bet against the market. \u201cGenerally speaking, I don’t believe investors use cash as an asset class or store of value but as a placeholder for future spending plans,\u201d Horodelski noted.<\/p>\n

That distinction is critical in the current Canadian landscape, where the safety of a savings account could come with a real loss. While U.S. investors have enjoyed higher yields on cash-like instruments, Horodelski notes that Canadian returns are \u201cnot particularly attractive for cash.\u201d With one-year GICs paying roughly 2.5 per cent, cash sitting on the sidelines is barely keeping pace with the cost of living<\/a>, meaning it isn\u2019t just missing upside \u2014 it\u2019s struggling to hold its value.<\/p>\n

That dynamic, Horodelski warns, helps explain why attempts to move into and out of cash tend to disappoint. When retail investors do move into cash, it often happens after volatility has already arrived, not before \u2014 and re-entry tends to come only once markets feel safer again. The result is less a defensive strategy than a delayed reaction, one that sacrifices time in the market without reliably reducing risk.<\/p>\n

Pereira says this is where popular ideas like \u201cwaiting for a better entry point\u201d or \u201cbuying the dip\u201d break down. They sound disciplined, but over time they tend to underperform staying invested. Research consistently shows that the opportunity cost of sitting in cash outweighs the benefit of avoiding short-term drawdowns. Cash held with a clear plan can be useful. Cash held in anticipation of clarity rarely is.<\/p>\n

That same logic applies to products and strategies that promise protection without trade-offs, Pereira warns. Anything offering downside insurance does so at a cost, he says, typically by limiting upside. While Pereira emphasizes portfolio construction and risk tolerance over reaction, Horodelski adds that valuation and long market cycles still matter over time.<\/p>\n

Together, they say, structure beats response \u2014 aligning portfolios with risk tolerance, understanding where markets sit in longer cycles, and accepting that uncertainty is not a signal to stop investing, but a constant feature of it.<\/p>\n

John MacFarlane is a senior reporter at Yahoo Finance Canada. Follow him on X @jmacf. Download the Yahoo Finance app, available for Apple and Android.<\/p>\n","protected":false},"excerpt":{"rendered":"After a year of uncertainty and volatility, with U.S. tariffs dominating headlines and regular invocations of an \u201cAI…\n","protected":false},"author":2,"featured_media":366287,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[45,49,48,5141,157018,157017,16769],"class_list":["post-366286","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-business","tag-ca","tag-canada","tag-economic-uncertainty","tag-frances-horodelski","tag-jason-pereira","tag-volatility"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/366286","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=366286"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/366286\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/366287"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=366286"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=366286"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=366286"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}