Cash is not king, over the long term

Well this is quite the instructive chart, taken from Tim Hale’s book Smarter Investing.

If you were unfortunate enough to have invested in global equities right before the 2007-8 financial crisis then you would have lost a whopping 28% of your investment by 2009, vs a gain of 2% if you just held cash savings. All figures after inflation taken out. Oh no. Devastating times. And it truly was for too many people.

But if you didn’t have the need (or emotional reaction) to sell out in 2009 and held to the time the book was written in 2022 - then you would have seen a gain of 132% vs a loss of 27% had you held onto your ‘safe’ cash investment, again all after inflation.

I knew cash loses value and equities on average do better but this chart helps put even the most catastrophic time in the market into a useful perspective.

Of course you’d have done even better had you only bought stocks at the nadir of the crisis. But the problem is that it’s rather hard - read impossible - to know when that is, let alone have the discipline and nerves of steel to go all in at that point. So, if what I think his theory is probably going to be is correct, far better to invest when you can - because if you end up waiting for the best time outside of the market then history suggests you’ll lose purchasing power.

Nothing here is, of course, investment advice! I haven’t even read his whole book yet :)