Why CASH is a BAD investment right now

Since I have been on the board, I am shocked at how many people believe that switching to cash, and/or trying to time the market is a sound if not preferred market strategy. I think cash can be useful in your portfolio, but only for specific purposes and not as a strategy. My argument becomes stronger the longer your investment time horizon. I know certain members of this board will not take my word for it(debating you guys is more fun anyway) So I have compiled a list of statistics to back my side of the argument. Also since you guys are so in love with the SP500, I will use that as my example

Bears vs. Bulls

SP500 had 8 bear markets from 1946 - 2007

The avg. Bull lasted 2.7 years
The avg. Bears lasted 0.7 years
The growth of a $10,000 investment in the SP500 in '46 had reached a value of $9,009,485 by '07
...but only for those buy and hold, long term investors. Had you tried to be smarter than the market and gone to cash...well not so much

Timing the market

Scholars recently estimated that from 1926-1993 any investor had a 0.00000000000000000000000000000000000
0000000000000000000000000000000000000
0000000000000000000000000000000000000
0000000000000000000000000000000000000
0000000000000000000000000000000000000
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000000000000000000000022883557% chance of timing the market correctly all of the time.
Thats 242 zero's before the number, and yes I tripled checked its accuracy.
Not saying you cant do it, Im just saying its probably not going to happen

The problem however is that some people try to do just that. Historically a bull markets best gains have been in the beginning.
So there are considerably penalties for being in cash at the wrong time, even if you miss it by a couple of days.
Consider This:
SP500 Total returns from 1925-2007

Market Index - all months - 10.3%
exclude best 5 months - 8.4%
exclude best 10 months - 7.5%
exclude best 20 months - 5.3%
exclude best 40 months - 3.6%

SP500 Total returns from 1977 - 2007

Market Index - all days - 12.8%
exclude best 10 days - 10.8%
exclude best 20 days - 9.4%
exclude best 40 days - 6.8%
exclude best 50 days - 5.8%

I guess if you can acurately predict the best days then you shouldnt worry about this, but statistically I dont think that going to happen.
For me Id rather not take the chance, stick to time tested investment principles, and reap the rewards.

Timing the market and moving in and out of cash doesnt work, no matter what your charts tell you. Even if your literally days behind recognizing that fact, you will be seriously penalized for it.

The market will get thru this, it always does. For those that stuck with a disciplined investment strategy you will be stronger for it