Sitting in cash may feel safe, but inflation and taxes can be key detractors of wealth for certain investors. If the rate of interest you are earning on your cash is less than inflation, as is happening now, your spending power will gradually be eroded. Being invested in markets—and staying invested—is the key to achieving growth over the long term.

Phasing into markets
While market volatility presents challenges, it also provides opportunities for some investors, depending on their suitability requirements, risk tolerance and time horizon, among other factors. But how do you participate while mitigating the effects of volatility? Taking a phased-in approach rather than investing cash all at once can allow you to seize opportunities, such as taking advantage of price declines in assets that are otherwise fundamentally sound, while still protecting yourself. By investing incrementally and staying in the market, you can also potentially reduce the impact of near-term market declines.

Participating in recovery
If appropriate, gradually feeding your money into markets may offer a way for you to participate in a recovery while limiting your exposure to volatility. Staying on the sidelines, however, means you could miss out on market recoveries completely. In fact, research has shown that skipping only a handful of the market’s best days can have a significant impact on investment returns.¹ As an example, a $1 million portfolio invested in the S&P 500 from 1988 to 2012 would have returned $9.1 million, while the same amount invested over the same period excluding the 40 best days would have returned only $1.3 million. That’s a difference of $7.8 million, or 830 basis points.

Similar to the approach commonly used by institutions and corporations, there are many ways for you to make the most of your excess cash and act on timely opportunities as they arise.

We invite you to contact us to learn more and a J.P. Morgan representative will be in touch with you.