Is it common for people to hold cash in investmentment accounts when the market is going down?

adindas

isayhello said:

To clarify, what I mean is when the market looks to be heading into a recession or there are bad signs, is it a common strategy for people to remove their money from investments and just hold them as cash to stop them dropping in value in case they need access to the cash sooner or they just want the flexibility to remove it without feeling locked in till the market recovers? Would this be wiser for people nearing retirement age?

I'm newish to investing and have seen people talking about how their portfolios have lost value but they expected this to happen, so why not just skip out and reinvest later?

Noone knows when this bear market will end but we do know that if start investing now is better than starting it early this year. A sensible approach to see when when this bear market will end imo is to see what cause this bear market, stock market downturn in the first instance and as long as they are still there, it might not end. Also you could also try to find put the "general consensus" from investing, financial experts. There are a lot of them in financial medias such as CNBC, Bloomberg, yahoo finance, Reuter etc. But if you wait get until this moment you might be ate to the party.

Whether you will be better off keep piling a lot of cash or throwing lumpsum, doing DCA (drip feeding)  noone knows until you find out the result in the later date.

But doing DCA (keep drip feeding in a smaller chunk) especially during the market downturn / bear market is recognised as one of a smart strategy by authoritative sources. This is just one of a few examples: Smart Strategies for a Bear Market - Accumulate With Dollar Cost Averaging  (DCA) By The Investopedia Team

https://www.investopedia.com/8-ways-to-survive-a-market-downturn-4773417

Also if you regularly watch the authoritative investment channels, this is what is normally advocated by many investing experts.

Having cash as long as is not sitting idle but earning something is an investment. Say for instance you put 40% in cash aside while 60% in equity, in simple term, the risk is quite similar to Vanguard Life Strategy 60/40.

There are a few Regular saving Accounts are paying 5% interest; A few instant saving,current accounts are paying 2% interest. Yes lower than inflation, but you are not talking about holding that for many years. Also currently, it is a much better return than what you are getting from investing in equity.

Reasonable number of hedge funds managers are holding cash. Warren Buffet are holding $144 billion in cash instead of buying more stock.

https://grow.acorns.com/why-warren-buffett-holds-hundreds-of-billions-in-cash/

But many people do not have skills or analytical tools like Warren Buffet or Acute Hedge fund managers. So a more sensible approach might be to keep doing DCA.