What staying in cash can cost investors

Investors who keep too much money in cash may miss out on higher returns, even though money market funds and CDs still offer solid yields. A CNBC report published Wednesday said that cash holdings have remained elevated in recent years, despite the Federal Reserve cutting rates three times last year and then pausing its easing cycle in December. BlackRock said the opportunity cost of staying sidelined could be rising. In its analysis, cash returned about 2.8% on average in prior ratecutting cycles after a pause of three months or longer, while bonds historically returned about 7% to 9% over the same period. Several firms, including BlackRock, UBS and Wells Fargo Investment Institute, suggested investors consider shifting excess cash into highquality bonds instead of waiting on the sidelines. They pointed to short and intermediateduration bonds, including investmentgrade corporates, mortgagebacked securities and some municipal bonds, as ways to earn income while managing interestrate risk. The advice comes as traders remain unsure about the Fed’s next move, with most not pricing in a cut this year. BlackRock said investors may want to hedge their bets by adding some duration now, while Wells Fargo said intermediateterm bonds could outperform cash if the Fed lowers rates again over the next few years.