Financial Planning Cash is not a risk-free investment

The guidance is positioned as part of a slight dial-back of risk posture, and it comes from Lerner and his team’s use of a “weight-of-the-evidence” analysis. As Lerner explained on the podcast, this evidence-based approach is central to the Truist investment philosophy and is meant to help counter risky emotional investing.

Emotional responses can flare in any market. Amid uncertainty, that could look like a desire by investors to seek the steadiness of cash with interest income. But that perceived steadiness may be misleading. Let’s look at why.

High-net-worth investors hold an average of 25% of their portfolio in cash or cash equivalents, according to a 2024 report^{Disclosure 3} from Capgemini Research Institute. Of course, they’re rarely physically keeping paper currency and coins. They’ve got deposit accounts and other cash-equivalent holdings such as U.S. Treasury bills and short-term government bonds.

Individual investors may increase their portfolio’s share of cash intentionally by changing their existing investment mix, or by holding back from making new investments in non-cash assets. Market volatility can create an emotional pull to that choice, but beware, Lerner warns. “One of the things we often say is, pullbacks are the admission price to the market.” Historically, the cost of a pullback is offset by growth over time.

Investors may also unintentionally increase their cash holdings by not rebalancing their portfolios periodically. Over time, higher-performing assets can pull a portfolio out of alignment with the investor’s strategic plan. Remember the reasons for your strategy, Elder advises. “If you stay true to your plan over time, that increases the probability that you're going to achieve what you have in mind,” she says.

Your cash strategy is unique to your own circumstances. The right percentage of cash and every other asset in your diversified mix is based on your goals, time horizon, risk tolerance, and values. “Portfolios need to meet the unique needs of each client. It's not a one-size-fits-all,” Lerner says. His team of market strategists works with each Truist Wealth client’s advisor to discern the risks the client is willing to take, the return they hope to achieve, and their overall goals for their wealth.

Listen to the full episode and download our one-page summary of the Truist Wealth Investment Philosophy.