ANOTHER year has closed with the S&P 500 delivering positive returns.
Once again, the narrative across financial media has been familiar: resilience, record highs, and renewed confidence that staying fully invested is the only rational path to long-term wealth.
Yet despite the strong gains in 2025, I did not go all-in.
That choice was not driven by fear, pessimism, or a belief that markets were about to collapse. It was driven by the most important lesson I have learned since I started trading and investing in US markets in 2020.
Cash is an asset
In fact, cash is often the asset that gives investors the greatest advantage when uncertainty is high and opportunity is unevenly distributed.
Markets reward confidence, but punish certainty
Over the last several years, markets have repeatedly shown that confidence can be rewarded, but certainty is dangerous.
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Investors have navigated a global pandemic, aggressive interest-rate hikes, inflation shocks, regional banking stress, geopolitical conflicts, and rapid technological disruption driven by artificial intelligence.
Despite all of this, US equity markets have continued to move higher over time.
That reality has convinced many market participants that if you simply stay invested, ignore volatility, and trust forecasts, everything will work out.
Unfortunately, my experience suggests that this belief oversimplifies how markets actually function.
Markets are complex systems influenced by countless variables—many of which cannot be predicted, modeled, or timed. No individual, institution, or algorithm can consistently forecast market direction with precision.
Yet predictions remain one of the most popular and marketable products in finance, because certainty is comforting.
Comfort, however, is rarely where disciplined investing decisions are made.
What 2020 taught me about capital and control
When I entered U.S. markets in 2020, volatility was not theoretical—it was immediate and unforgiving. Prices moved violently. Liquidity vanished in moments. Conviction was tested daily.
What became clear to me very quickly is that being fully invested at all times removes flexibility. When capital is fully deployed, decision-making becomes reactive rather than deliberate.
Investors are forced to hold, sell, or double down based on emotion rather than opportunity.
Cash changes that dynamic.
Holding cash provides optionality. It allows investors to step back, assess risk objectively, and act when probabilities are favorable rather than when sentiment is euphoric. Over time, I came to understand that cash is not idle—it is strategic.
Cash is not a market call—It is risk management
Choosing to hold cash is often misunderstood as an attempt to time the market. That is not how I view it.
Holding cash is not a prediction that markets will fall. It is a recognition that uncertainty is constant and that risk should be managed, not ignored.
Cash allows investors to:
n Absorb volatility without panic;
n Avoid forced selling during drawdowns;
n Deploy capital selectively when assets are mispriced;
n Maintain clarity when others are driven by emotion.
In 2025, strong index performance did not eliminate valuation risk, concentration risk, or macro uncertainty. Rather than chase returns, I prioritized flexibility. That meant remaining partially invested while preserving capital for future opportunities.
Buffett’s retirement—and a timeless lesson
This perspective feels particularly relevant as Warren Buffett officially retired from leadership at Berkshire Hathaway on December 312025, even as he continues to show up to the office.
Buffett’s career is often reduced to simple slogans, but his enduring lesson is discipline.
He has never felt compelled to be fully invested simply because markets were rising.
On the contrary, Berkshire has frequently held large cash balances—sometimes to the frustration of critics.
History has repeatedly shown why.
Cash allowed Berkshire to act decisively during periods of crisis, when assets were undervalued and capital was scarce.
Cash was not a drag on performance; it was the reason extraordinary opportunities could be seized when others were constrained.
That lesson remains as relevant today as it was decades ago.
Why I do not build strategies around predictions
Each year ends with a flood of forecasts: interest-rate paths, market highs and lows, and so-called “sure bets.” I pay attention, but I do not anchor my strategy to any of them.
Predictions can be informative, but they rarely improve outcomes.
Instead, my focus is on:
n Understanding publicly listed businesses;
n Evaluating balance sheets, cash flows, and competitive advantages;
n Assessing valuation relative to risk;
n Structuring trades and investments with defined downside.
This approach does not require knowing where markets will be next quarter. It requires preparation, patience, and humility.
If markets rise, I want exposure through businesses I understand.
If markets fall, I want capital ready to deploy.
If markets move sideways, I want strategies that reward discipline and time.
Risk management is the real edge
Over time, I have learned that success in markets is not driven by superior forecasting. It is driven by risk management.
Position sizing matters. Concentration matters. Liquidity matters. Survival matters.
The objective is not to outperform every year. The objective is to remain solvent, disciplined, and psychologically stable long enough for compounding to work.
This philosophy underpins everything I share through Streetwise Economics — from market commentary to education and coaching. The goal is not to promise certainty, but to build processes that endure across cycles.
Looking ahead to 2026
As we enter 2026, I am optimistic—but not predictive.
I do not know what markets will deliver. I do not know which risks will surface. And I am comfortable admitting that.
What I do know is that volatility will return, opportunities will emerge, and those who are prepared will be positioned to act.
Cash will continue to provide flexibility. Discipline will continue to matter.
I am looking forward to what 2026 has in store—not because I expect smooth markets, but because uncertainty is where thoughtful investors create long-term advantage.
For ongoing insights into markets, investing, and risk management, I share my thinking regularly on the Streetwise Economics YouTube channel. Coaching and educational resources are available at www.streetwiseeconomics.com.
In markets, as in life, patience and preparation tend to outperform prediction.
