On Friday, Bank of America data showed us investors had thrown $45.6 billion into cash funds in the week to March 24.
If this looks familiar, it’s because that’s pretty much what we saw a year ago, at the onset of the pandemic. In fact, this is the largest inflow of cash since April 2020 and ratcheted up exposure to U.S. inflation protection.
Treasury Inflation-Protected Securities (TIPS) funds saw an inflow of $1.8 billion, their third-largest inflow ever.
But if we learned anything last year, could it be that this is the wrong time to be cashing out? Investors who got out of stocks last April missed the incredible rebound, followed by gains in the last quarter of 2020.
Look, timing the markets is terribly difficult. But then again, so is holding on as share prices enter a free fall.
To minimize the psychological angst of investing during times like these, dollar-cost averaging can work well. You might never buy at the bottom, but you never sell at the top, either.