In our previous columns, we’ve often addressed a major pitfall for bond investors: the attempt to out-guess the market. Many are frustrated with current yields and decide to keep their investment dollars parked in money market funds, waiting for long-term interest rates to become more attractive. Currently, a staggering $7.186 trillion is idly sitting in US money-market funds, as investors wait for the “right” moment to enter the market.
However, this strategy frequently overlooks the hidden cost of waiting that can be significant. Like well-known risks such as credit and market risk, the decision to delay investing could carry serious consequences, including lost time and money that may never be reclaimed.
If you have funds set aside for tax-free bonds, it could be the perfect opportunity to put them to work. Quality long Munis remain near 5%, with over a 7% taxable equivalent for high-tax state residents. The potential returns from these investments could diminish considerably with further delays. It’s important not to underestimate the risks of remaining on the sidelines in hopes of better rates
Think about investing now versus waiting. When funds are in a money market, they aren’t achieving optimal returns. If rates decline, you not only lose out on today’s benefits but also risk further decreases in money market yields. Just how long would it take to recover lost income from waiting? Simply put, waiting could quate to lost opportunities and fails to maximize your investment potential.
Deferring investment carries various risks:
- Delays can cause missed gains if the market prices rises.
- Holding cash risks diminished purchasing power from inflation.
- You forfeit potential compound interest and lower overall returns.
- Inaction driven by fear can lead to missed opportunities.
- Economic changes might force you to enter the market under less favorable conditions.
Consider labor unions in the 1950s; their experience with strikes for higher wages taught them that prolonged absence resulted in irrecoverable losses. This insight shifted their priorities to negotiating better fringe benefits and pensions.
As one of our long-term clients wisely puts it, “My interest clock is always ticking.” Don’t allow your investment clock to run out on a valuable opportunity.
Here is a sample of AA rated Muni Yields as of 8/26/25:
10-yr – 4.00%
15-yr – 4.50%
20-yr – 5.00%
