As investors prepare for 2026, a common impulse is to park large amounts of money in cash accounts to avoid market volatility and economic uncertainty. Keeping cash on the sidelines feels safe because it isn’t subject to stock price swings or credit risk. But financial experts increasingly point out that sitting on cash for years at a time can create a different type of risk — one that quietly erodes your financial progress.

The most familiar danger of holding cash is inflation. When the cost of goods and services rises, the purchasing power of your cash falls. Even if your savings account pays some interest, most traditional cash or money-market instruments struggle to keep pace with rising prices. Over a multi-year period, inflation can significantly reduce real wealth, which means a portfolio that seems stable could actually lose value in terms of what it can buy in the future.

Another concern is the opportunity cost of cash. While markets fluctuate, history shows that long-term returns in equities and other growth assets often outpace returns on low-yield cash. When you keep too much capital in a savings account, you miss out on potential gains from stocks, bonds, and other productive investments. That can be especially costly over a multi-decade horizon, where compounding returns on growth assets are a key driver of wealth creation.

There’s also a behavioural element: holding cash can delay investment decisions. Investors waiting for a “perfect entry point” may find themselves permanently on the sidelines, missing periods of strong market performance. Since timing the market is notoriously difficult, this approach can lock in underperformance compared with a disciplined strategy of long-term investing.

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For most long-term goals — such as retirement, education funding, or legacy building — a balanced portfolio that includes equities, fixed income, and other diversifiers tends to outperform an all-cash position. Cash still has a place, chiefly as an emergency reserve or for near-term obligations, but allocating too much there for extended periods undermines growth potential.

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In short, while cash feels safe, it isn’t risk-free in real terms. Investors who rely too heavily on cash heading into 2026 could find that the “safe option” becomes the biggest drag on their long-term financial goals. Adjusting your strategy toward a diversified, goal-aligned portfolio may better support meaningful progress over time.