Pure Benchmarks · Guide

Should I Move My Portfolio to Cash Before Things Get Worse?

Short answer

Moving to cash is a two-part decision, and most people only plan the first part. Selling is easy; knowing when to go back in is the hard half, because markets usually feel safe only after much of the recovery has happened. There are sound reasons to hold more cash, such as money you need within a couple of years or a deliberate move to a lower risk level. A forecast that things will get worse is the weakest reason, because it requires being right twice. What can be measured is what moving to cash did to your own portfolio the last time you tried it.

Going to cash feels like the one move that cannot go wrong: the balance stops falling and the stress stops with it. The cost shows up later and more quietly, as the gains missed between selling and buying back in. This page does not tell you whether to hold cash. It separates the reasons for holding cash that stand up without a forecast from the ones that depend on one, sets out what history shows about the recovery window, and explains how to measure what your own past moves to cash were worth.

Reasons for cash that need no forecast

Money you need within a couple of years, for a house, tuition or retirement income, arguably should not depend on what the stock market does in that period. Holding an emergency reserve is a statement about your life, not about markets. Deliberately choosing a lower risk level because your circumstances changed is a plan. All three can be written down, justified in advance, and defended afterwards regardless of what prices do next.

The reason that needs you to be right twice

Moving to cash because you expect a further fall requires two correct calls: getting out before the fall and getting back in before the recovery. The second is harder, because the signals that make it feel safe to reinvest tend to arrive after prices have already moved. Hartford Funds found 76 percent of the market’s best single days fall inside a bear market or within the first two months of a recovery, exactly when someone waiting for calm is still in cash.

What the recovery window costs

JP Morgan Asset Management data shows that missing just 10 of the best trading days out of roughly 4,900 over 20 years cuts a $10,000 investment from $71,750 to $32,871. DALBAR has measured investor behaviour for 40 years and found the average equity fund investor trailed the S&P 500 by 848 basis points in 2024, largely through timing. These are averages across many investors and say nothing definitive about you, which is why your own history is worth checking.

Write the reentry rule before you sell

If you move to cash, the question that decides the outcome is when you go back in. A rule stated in advance, in terms of a date, a price, or an allocation, is a plan. A rule that says when things settle down is not, because things feel settled only after the rebound. If you cannot state the reentry condition before selling, you have made one decision and deferred the harder one.

Measuring what cash did last time

Your transaction history records every move to cash you made during past selloffs. Rebuild the portfolio as it stood before each one, price it forward on real data, and the gap shows what the move cost or saved. Pure Benchmarks, our own product, does that from connected holdings and ranks the result against verified investors in the same risk category who held through the same conditions.

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Frequently asked questions

Should I move my investments to cash right now?

Holding cash for money you need soon, for an emergency reserve, or because you deliberately want a lower risk level are reasons that do not depend on a forecast. Moving to cash because you expect the market to fall requires timing both the exit and the reentry. This page is information for comparison and not a recommendation about any holding.

Is it smart to go to cash before a recession?

It requires being right twice: about the fall and about when to reinvest. The recovery often begins while conditions still look bad, and Hartford Funds found most of the best single days fall inside a bear market or the first two months of a recovery. Missing those days is where much of the cost of going to cash comes from.

What happens if I go to cash and the market keeps rising?

You face the harder half of the decision, choosing whether to buy back in at higher prices. Many investors stay out longer than planned because reentering feels like admitting the exit was wrong. That is why a written reentry rule, stated before selling, matters more than the exit itself.

How much of my portfolio should be in cash?

That depends on when you need the money, your income stability and your risk tolerance, which is why no general number applies. What can be measured is how your past changes to cash compared with holding, which shows whether cash has protected your portfolio or cost it.

Can I see what moving to cash cost me in the past?

Yes. Your transaction history and real historical prices are enough to rebuild the portfolio as if you had not sold. Pure Benchmarks, our own product, calculates that difference from connected holdings.

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This page is an information baseline for comparison only. It is not investment advice and not a recommendation to buy, sell, replace, or transfer any specific asset, account, or firm. Past performance does not guarantee future results. All figures shown are illustrative.