"Cash is trash."

We hear this phrase repeated endlessly in the financial media. The argument is simple: if your money is sitting in cash, inflation is eating it alive, and you are missing out on market gains.

Most fund managers are terrified of cash. They feel pressured to be 100% invested at all times to justify their fees. But here at the Relax to Rich Club, we view things differently. We don't see cash as a drag on performance. We see it as a weapon.

Here is why holding a boring pile of cash might be the most exciting part of your strategy.

The return on cash isn't just the interest rate the bank pays you. Its real value is behavioral.

In a bull market, you look foolish holding cash while your neighbor brag about their gains in the latest tech darling. But markets move in cycles. When the inevitable downturn hits, cash becomes the "thin green line" that separates crisis from opportunity.

If you have no cash during a crash, you might panic and sell your stocks at the bottom just to survive. That destroys wealth. If you do have cash, you don't have to sell. You have the fortitude to wait. That emotional stability is worth far more than a 1% or 2% difference in returns.

Critics say you shouldn't hold cash because you might wait years for a dip. But history tells a different story.

Markets are incredibly volatile. Even stable, massive companies in the S&P 500 often see a huge gap between their high price and low price within a single year. On average, that gap can be around 35%.

This means you rarely have to wait long to put your money to work. By holding cash, you give yourself the flexibility to buy great assets when they go on sale, rather than being fully invested at the peak.

Imagine you are looking at a solid company. You want a 15% annual return to justify the risk, but at today's high price, the math says you will likely only get 10%.

Most investors buy it anyway because "10% is better than 0% in the bank."

This is a trap.

When you settle for a mediocre return, you abandon your discipline. If you buy that stock today, and the price drops 20% to its fair value (where it would offer that 15% return you actually wanted), you are stuck. You have lost principal and you have no cash left to buy at the better price.

Holding cash allows you to say "no" to average deals so you are ready to say "yes" to incredible ones. It frames the choice differently: it is not a choice between 0% and 10%. It is a choice between earning 0% now to avoid losing 20% later.

We don't hold cash because we love inflation. We hold it because we love optionality. We don't look at our cash pile to decide if we should buy stocks. We look at stocks to decide if they are worthy of our cash.

What is your current cash position? Are you fully invested, or are you keeping some powder dry for the next opportunity? Let me know in the comments.

To your wealth and peace of mind,

William

Relax to Rich Club