The Myth of Money Neutrality: Why Cash Can Cost You More Than You Think

January 29, 2024

Cash is not a neutral investment.

There is no neutral battlefield when it comes to money and investing.

As one investor put it, cash can be a depreciating asset, not a safe haven.

Even for those who didn’t literally pile stacks of cash under their mattress and instead chose to sit entirely in Treasury Bills or Certificates of Deposit—which are both commonly viewed as cash equivalents—enjoying higher interest rates than a few years ago is not neutral. It’s an investment choice with its own pros and cons.

Though they promise protection, they can have costs.

One of these costs is the fulfillment of FOMO (Fear Of Missing Out), more like ROMO (Reality Of Missing Out) considering how well last year performed for risk assets. 

“Such competitive yields may have given people a false sense of security about the benefits of lower-risk, short-term instruments,” says Rob Haworth, senior investment strategy director at U.S. Bank Wealth Management. “Yet those who put money to work in cash-equivalent vehicles in 2023 as an alternative to stocks missed out on what proved to be an impressive year for stock market returns.” The benchmark S&P 500 stock index generated a total return of more than 26% in 2023.1

Even with cash equivalents paying 5%, stocks gave cash a shellacking last year.

Another cost is opportunity cost. If you sit out until you’re comfortable, you might have sat out the bear market only to find out you’ve also sat out the entire recovery.

Did you know that between 1928-2022 odds were more likely that stocks outperform cash even over a short time frame like 1 year?2

And those odds, as Charlie Bilello over at Creative Planning shows in his chart above, have improved as the time frame gets longer.3

Equating investing with gambling or rolling the dice is not really accurate.

Of course, this doesn’t mean stocks will go up this year or that you should invest in them.

It does mean though that you should at least consider the choices you are making in your investment portfolio and whether you are listening to noise or data, living in fear or healthy realism, and acting in a way that is best for your short- and long-term goals.

Cash is an option, but investment neutrality is not.



  1. “Cash management and investing strategies when interest rates are up”, January 11, 2024. Accessed online:
  2. Referenced by Peter Mallouk via X on January 18, 2024. Accessed online: