Chapter 1 of 2
The Cash Drag
Carla's $480k in cash is earning 4.8% in a money market. The S&P 500 has averaged 10.5% annually over the past 30 years. She models the 10-year opportunity cost of staying in cash vs. a 60/40 portfolio vs. a 40/60 portfolio — the most conservative equity allocation she can imagine.
Key Insight
Over 10 years, Carla's cash drag costs her an estimated $210k in foregone growth compared to a 40/60 portfolio. A 40/60 allocation still has a 94% Monte Carlo success rate through age 90 — with far less volatility than she fears.
Model This Scenario