The Financial Advisor Who Tells All His Clients to Hold Cash Right Now — and Why He’s Right

Seeing the amount in your savings account increase by a few dollars every month brings a certain level of comfort. The number is visible. The screen can be refreshed. Nothing is trembling or falling 15% on a Tuesday due to a statement made by a central banker in Jackson Hole. That’s sufficient for many households. They experience a sense of near-calm as they gaze at the figure. Strangely, those who work as financial managers are concerned about that very feeling.

For years, Uziel Gomez, a certified financial planner who operates Primeros Financial in Los Angeles, has been subtly disputing that sentiment. “Having too much excess cash is not the best thing,” he recently stated to CNBC. “If you keep everything in cash, you’re essentially losing money year to year.” It sounds almost impolite and counterintuitive. The money is still there. However, that is the trick of inflation—a gradual leak that goes unnoticed until one looks up and finds that their grocery bill has doubled.

This month, BlackRock’s chief investment and portfolio strategist for the Americas, Gargi Chaudhuri, expressed the same idea in a more analytical manner. “Cash can feel safe, but it doesn’t grow your wealth,” she said. After a minute of sitting with the math, it becomes uncomfortable. Thirty years ago, ten thousand dollars stashed in a safe and earning nothing would now be worth roughly $4,700. With no obvious villain, about half of its purchasing power is gone.

Over the same period, the same ten thousand dollars fell into the S&P 500? approximately $92,600. The market outpaced the gradual deterioration that cash could never keep up with, not because it is magical. It’s difficult not to wonder how much wealth has subtly vanished in the savings accounts of cautious people who believed they were acting responsibly when you watch this comparison over decades.

There is, of course, a variation of this advice that becomes reckless. A serious advisor would never advise a young couple to invest all of their emergency funds in tech stocks. Gomez doesn’t either. It is not negotiable to have some cash on hand to cover things like three months’ worth of rent following a layoff or a broken transmission. The debate centers on excess, or money that is left over after a household’s actual needs while inflation works silently in the background.

Although it has decreased, inflation remains stubbornly above the Fed’s 2% target, having reached a forty-year high in 2022. The Middle East conflict, supply-chain instability, and geopolitical noise all prevent the number from stabilizing where economists would like. Speaking with advisors lately, it seems like clients are reading the news and gravitating toward cash once more, just like they did in late 2008 and 2020.

It is an almost touching human instinct. You can trust money that you can see. However, your anxiety does not make the math easier. Regardless of how the portfolio feels at nine thirty in the morning, it simply continues to operate year after year. In a limited sense, advisors who advise clients to keep some cash on hand are correct. Less so are those who advise them to hold everything. Even if they don’t want to, most people should probably be standing somewhere in the middle of those two positions.