• Matt Morizio

Should you move your 401k to cash?

The next couple weeks are going to be hard for America. The positive COVID-19 cases and death counts will go up. These weeks will be discussed in history classes for centuries to come.


And woven into those discussions will be stock market performance: good, bad, and ugly.


If you’ve talked to your advisor lately, you’ve probably been told to stay the course, trust the process, and remain invested…and for good reason. There are countless studies highlighting how emotional moves to cash cost you money in the long run and that global health scares don’t crush long term returns.


If you’ve never seen a study like that, *here is one example that I pulled the charts from below. **Here and ***here and ****here are three other examples by Merrill, Schwab, and Putnam respectively.


In my opinion, there are only two reasons this makes sense for an investor with a long-term plans (5+ years) for their money.




As a person going through this scary time with you, my heart goes out to everyone dealing with how this virus is changing their life.


But as an investment advisor, I put my emotions to the side and encourage you to keep going with your investment plan.


“But Matt, you said you have two reasons when it makes sense to move to cash???”


Well, the first is if you can predict the future.


If you knew when to pull out because the market was on the brink of disaster a few weeks ago, and you can tell me exactly when the market is going to rebound, then absolutely make the move.


And let me congratulate you on being the first person in history to ever see into the future.


The second reason is if you can’t sleep at night watching your account value drop. While you don’t technically lose money until you sell, aka lock in the losses, it can be miserable to watch.

And if that’s you, I believe there’s no sense in destroying your health for the sake of sticking to a financial plan. Some people’s lives are better off moving to cash, sleeping peacefully, and jumping back on the boat when it’s smoother sailing.


But remember, investing and emotions don’t play well together.


And the move to cash is purely emotional.


It isn’t statistically the correct move, but in rare circumstance it might be right for you.


Consider these studies before giving in to your emotions, and if, after understanding the risks of staying invested versus moving to cash you still can’t bear to watch your money drop, make the move with confidence. It’s ok. Learn and move on. Life doesn’t end.


Quality of life and your relationships with people will always trump how much money is in your bank account, and both are adversely affected if you can’t sleep at night because of your investment account.


*https://www.ifa.com/articles/market-timing_more_evidence_really_doesnt_work/

**https://www.merrilledge.com/article/focus-on-time-in-market-not-market-timing

***https://www.schwab.com/resource-center/insights/content/does-market-timing-work

****https://www.putnam.com/literature/pdf/II508-d206c267bdc67daad04ae51e1e47a6d4.pdf




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Investment advice offered through Beck Bode, LLC, a fee-only Registered Investment Advisor in the Greater Boston area.