Should Investors Be Stashing Cash for 2022? | Personal-finance

In other words, if you hold cash in 2022, you are practically guaranteeing a loss in value. The question is whether this guaranteed loss is better than other investment options.

Is it worth the risk?

The market valuations are certainly very high. Cyclically Adjusted P / E (CAPE) – a historical measure of market valuations based on price-earnings ratio – hasn’t been this high since the dot-com bubble. And it has never been this high before.

But you can’t look at stock valuations in a vacuum. Government bonds are also yielding near historic lows. This means that the risk-free return is very low and investors should therefore be prepared to accept lower returns on stocks and thus higher stock prices.

At the very least, investors should have lower long-term returns on stocks and bonds. This could be due to slow and steady growth or an impending crash, and then revert to historical growth rates afterwards. It is impossible to say for sure.

If your plan is to invest long-term, you will likely have a more valuable portfolio investing in stocks in 2022 than holding cash for the next decade or more. Still, you can feel uncomfortable investing your money knowing there is a possibility of a stock market crash.


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