16 Jun Trump and the stock market: Should I stay in cash?

Q. After Trump was elected, I moved all my IRAs to cash. The money markets earn a little over 4%. This was always a temporary move but I’m 58 and while I’m not sure when I will retire, I’m concerned about investing in the stock market. What should I do?
— Concerned investor

A. Ah, yes. This comes down to market timing and all the risks it brings.

We certainly understand your concerns given the ups and downs that have taken place in the stock market these first few months of 2025.

While it may feel like “this time it’s different” given all the uncertainty that has created the market volatility, in any given year, there are almost always periods of time where the market takes a stumble only to get back up and continue onward and upward, said Claudia Mott, a certified financial planner with Epona Financial Solutions in Basking Ridge.

In fact, she said, a 10% — or greater — correction usually takes place about once a year according to data from Bloomberg.com.

With interest rates still at historically high levels, the decision to move your account to cash has provided you with some growth, she said. However, amidst all the volatility, the S&P 500 stock index has recouped the earlier losses and ended May with a total return for the year of 1.15%, Mott said.

“Over long periods of time, holding cash in an investment portfolio will likely mean that the growth will not keep up with inflation and you will lose purchasing power with your hard-earned retirement dollars,” she said.

There is a lot of research that supports the notion of investing for the long-term and not trying to time the market, Mott said. According to a study from J.P. Morgan, over the past 20 years, being fully invested in the S&P 500 would have generated a 10.2% annualized return, while being out of the market for the 10 worst days over that entire time period would reduce the gain to 6.0%.

“It should be noted that many of the best days followed periods of extremely bad market activity. Needless to say, there is never an engraved invitation that will tell you when to get back in—it often happens when it’s least expected,” she said.

While it likely doesn’t make sense for you to have your retirement assets 100% invested in the stock market, diversifying your account by owning a target date retirement fund might be a better option if you don’t want to buy a number of investments to create an asset allocation, Mott said.

“These funds are designed to align with an approximate retirement age and have varying proportions of stock and bond investments that are managed by the custodian that is offering the mutual fund,” she said. “As the time to retirement draws closer, the percentages will shift so that there is a lesser percentage of stock funds and a greater amount of bond funds and eventually some short-term cash.”

If you are conservative by nature, you can pick a retirement fund that has a lesser proportion of stock funds to bond funds as a starting point, she said.

“With many years ahead of you, having some percentage in stock investments is needed to provide capital growth while the bond portion of the investments creates interest income,” Mott said.

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This story was originally published in June 2025.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.