Any money you plan to allocate to a short-term goal, which will take place over the next one or two years, is best kept in cash, says Benz. Since there is no chance of the value decreasing, “cash is the best option, even if inflation is a risk factor,” he says. In general, having an emergency fund is good. However, having too much cash can slow down the growth of your overall wealth.
There are definitely some benefits to having cash in cash. When the stock market is in free fall, holding cash helps you avoid further losses. Even if the stock market doesn't fall on a particular day, there's always a chance that it may have fallen or will fall tomorrow. This possibility is known as systematic risk and can be completely avoided by keeping effective.