How much cash to hold in a savings account while waiting for a market correction?

Holding cash can provide comfort when markets are uncertain, but keeping too much on the sidelines can hurt long-term wealth creation. Here’s how to decide what to hold and what to invest.

I have a substantial amount sitting in my savings account because I’m waiting for a better entry point in the market. How do I decide how much cash is sensible to hold and how much is simply money sitting on the sidelines?

– Name withheld on request

When markets are uncertain, holding some money in your savings account can provide a sense of security. You have the flexibility to invest if markets correct, but how do you know when the right time to invest is? Even though holding cash may feel like the safer choice, it may not always be the right one. So, where do you start?

A good place to start is by setting your financial goals and looking at when you will need the money. Goals that are one to two years away need greater stability, so the money can be kept in debt. For goals that are two to five years away, you can consider a mix of equity and debt. Goals that are more than five years away give you more time to take a growth-oriented approach.

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