HODL, short for Hold On for Dear Life, is a popular term used amongst the cryptocurrency community. Although its origin can be debated, this slang term refers to the strategy of not selling your crypto assets even amid periods of heightened volatility – similar to a traditional buy-and-hold investment strategy. At WGCA, we urge investors and clients to HODL, not to an individual investment or asset class, but to their investment strategy, which is part of their comprehensive financial plan.
Since 2020, we have seen a large influx of assets making their way to money market funds in what can be perceived as a flight to safety. In 2023 alone, we have seen new all-time highs, with money market funds now $1.5 trillion higher than their levels in 2009 and $650 billion higher than their levels during the COVID-19 pandemic in 2020 – as seen below.
The turbulent markets we experienced last year and the current interest rate environment may have influenced investors to sell out of their portfolios and allocate to money market funds, but it is important for investors to remember that the long-term drivers of performance are a mixture of stocks and bonds. In fact, a WSJ article states that since 1928, cash has only outperformed both stocks and bonds over a calendar year 12 times. There is an old saying that “cash is king”, but for investors, 87% of the time, cash has not been king.
To illustrate the benefits of remaining invested over the long-term, we look at the following data: since 1928, the US stock market has experienced positive returns:
- 56% of the time on a daily basis
- 63% of the time on a monthly basis
- 75% of the time on a yearly basis
- 88% of the time on a 5-year basis
- 95% of the time on a 10-year basis
- 100% of the time on a 20-year basis
The international markets have shown similar results, as shown in the following table looking back to 1970.
Although cash is an important allocation for those with short-term liquidity needs, it should not replace your strategic allocation to stocks and bonds, especially if you have a long-term time horizon. Instead, talk to your financial advisor to reconfirm that your current stock and bond allocation mix is appropriate for your unique situation.
About Wolf Group Capital Advisors
At Wolf Group Capital Advisors, a comprehensive wealth management firm and Registered Investment Advisor (RIA) based in Fairfax, VA, nothing is more important than the fiduciary responsibility we have in managing your wealth. Taking the utmost care, we focus on providing advice tailored to your specific circumstances. With more than two decades advising U.S. expatriates and non-US citizens employed by international organizations, we are qualified in investment strategies addressing global issues. Empathy and curiosity—combined with our experience in life planning and investment management—enable you to explore a wider set of possibilities that can lead to a fulfilling life you’ve worked hard to attain.
The information presented is not an offer or a solicitation to buy or sell securities. The information contained in this presentation has been compiled from third-party sources and is believed to be reliable; however, its accuracy is not guaranteed and should not be relied upon in any way whatsoever. This presentation may not be construed as investment, tax or legal advice and does not give investment recommendations. Any opinion included in this report constitutes our judgment as of the date of this report and is subject to change without notice.
Diversification and asset allocation do not ensure a profit or guarantee against loss.
Additional information, including management fees and expenses, is provided on our Form ADV Part 2 available upon request or at the SEC’s Investment Adviser Public Disclosure website. Past performance is not a guarantee of future results.