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Sitting in cash? 7 steps to get off the sidelines

Key takeaways

  • Whether you're new to investing or you've been sitting in cash for years, it's not too late to put your money to work.
  • Try not to get stuck on regrets over missed gains, finding the next investment, or picking the perfect time to buy in.
  • Focus on choosing a well-rounded investment mix that takes on the right amount of risk for you.

There are many reasons why you might find yourself sitting in too much cash. For example, maybe you sold your investments at some point, you've been building up cash in an IRA or brokerage account (but still haven't chosen investments), or maybe you've never gotten totally comfortable with investing outside your 401(k).

Whatever your reason, it's never too late to get more fully invested. Whether you are invested 100% in cash or you just have more of it than would be necessary in case of emergencies or for short-term goals, here are some steps to consider to help you finally get off the sidelines.

Step 1: Let go of missed investments

If you feel down that you've missed out on any past market gains, you're not alone. One of Americans' top investing regrets is not investing more aggressively.Focusing on your regrets may leave you feeling as though you've missed or lost the opportunity. Make plans to move forward and look for opportunities in the market. 

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Step 2: Focus on future opportunities

Although there are no guarantees, the stock market has historically risen over the long term, and being invested in stocks and bonds has provided better growth than cash over long periods. A sound set of investments that are well-suited to your comfort level and goals, and that fit within your broader financial plan, can give you the chance to get a piece of the action next time around.

Step 3: Figure out the big picture

Putting a portfolio together from scratch can be a major undertaking, but breaking task into incremental decisions could help you avoid getting stuck.

Start with the basics. 

  • How much risk to take. People often think about risk in terms of how much an investment may rise or fall in price. The right level of risk may depend on how far away your investing goal is, how comfortable you feel with potential dips in your portfolio's value, and your financial situation.
  • Your big-picture investment mix. Asset allocation, which is your overall mix of stocks, bonds, cash, and other investments should generally flow from your risk tolerance, time horizon, and goals. A higher risk tolerance means you are comfortable holding more in investments with higher risk and higher return potential, like stocks.

As you work to assemble your portfolio, consider working with a financial professional to better clarify your needs and situation. 

To learn more about your risk tolerance and asset allocation, read Fidelity Viewpoints 3 keys to choosing investments.

Step 4: Consider which investments could work for you

Next, you'll need to pick specific investments. Although the number of options can be overwhelming, don't feel like you need to research every possible investment. Focus on building a diversified mix (either on your own or with the help of a financial professional). Fidelity provides various research platforms to access information on stocks bonds and mutual funds.

It's ok to keep it simple. In fact, you can invest in a diversified portfolio with a single fund or professionally managed account. 

Step 5: Pick an investing pace

Once you know how you want your portfolio to look, you can either:

  • Buy in all at once—with one or more big trades.
  • Buy in gradually over time—with consistent, smaller purchases.

Each approach has its pros and cons, and there are no guarantees that one will provide better returns than the other. Investing a lump sum all at once gives you more time in the market, which could provide the potential to beat a slow-and-steady approach. Conversely, spreading your investments out over time also known as dollar cost averaging, is an investment strategy where you invest a fixed sum of money at regular intervals over a period of time, regardless of the asset's price.

Tip: If you choose the gradual approach, you may be able to automate saving and investing for your new investing plan.

Step 6: Hold onto your investments

Instead of obsessing over the perfect timing for your trades, stay focused on your end goal, which is actually getting invested. Missing out on only a few days of market gains can make a big difference to your portfolio's long-term returns. In fact, staying invested while markets are down have historically provided some of the best subsequent returns.

Step 7: Get help if you need it

Trusting your money to the markets can be nerve-wracking. If you're finding it's hard to follow through on your investing plan or you just need more help forming one, it could make sense to check in with a financial professional. After all, there's nothing wrong with asking for help when you need it.

Ready to take the next steps? Consider getting started researching investments, by learning more about mutual funds or stocks or exploring a model portfolio. You can also learn more about investing in a digital managed account or working 1-on-1 with a dedicated Fidelity advisor.

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1. Steve Randall, "8 in 10 Americans admit regrets about their financial choices," Investment News, February 20, 2024, www.investmentnews.com/industry-news/news/8-in-10-americans-admit-regrets-about-their-financial-choices-249660.

Fidelity does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation.

Keep in mind that investing involves risk. The value of your investment will fluctuate over time, and you may gain or lose money.

Stock markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments. Investing in stock involves risks, including the loss of principal.

Diversification and asset allocation do not ensure a profit or guarantee against loss.

Past performance is no guarantee of future results.

Dollar cost averaging does not assure a profit or protect against loss.

This information is intended to be educational and is not tailored to the investment needs of any specific investor.

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