Cash Drag: T-Bills vs Being Invested

TL;DR

• T-bills/timed-out cash = low drawdowns but low long-run growth.
• Staying invested in stocks = bigger swings but meaningfully more compounding.
• A “temporary” cash park that lasts years can cost more than one bad year in stocks.

Method

We compare two simple paths over the same timeline:

• Always Invested: 100% in a broad US stock index (think SPY), dividends reinvested.
• Always in T-Bills: 100% in a short-term Treasury/T-bill proxy (cash-like), rolling from one bill to the next.

Data modeled on monthly total returns (price + income), fees and taxes ignored. Both paths start at 1.00× and evolve using the same contribution pattern—no timing tricks.

This is a stylized illustration of “cash drag,” not a recreation of any specific ETF or rate history.

Notes

• “T-bills” here just means a safe, low-volatility, low-yield cash alternative.
• No shifts from cash to stocks mid-sample: we isolate the gap between staying safe vs staying invested.
• Numbers are rounded; the point is the trade-off, not the exact decimals.
• Educational only. This is not personalized investment advice.

What the data says

In this kind of pattern, stocks move up and down but trend higher. T-bills barely move at all. The result: a meaningful gap in ending wealth even though the T-bill path never really “hurts.”

This is the core issue with long-term cash: you feel safe in the moment, but you quietly lock in a slower compounding rate. The gap isn’t obvious month to month; it shows up after years.

The summary table below gives rough numbers on growth vs risk for the two paths.

When cash drag is most dangerous

• You tell yourself you’ll “wait for a better entry,” then sit in cash for years.
• You park long-term money (retirement, decade-plus goals) in T-bills because markets feel scary.
• You chase every headline and keep “temporary” cash that never actually goes into your plan.
• You underestimate how much a few extra percentage points in return matter over 10–20+ years.

When T-bills actually make sense

• Money you really need soon (rent, taxes, an upcoming big purchase).
• Your emergency fund—cash is the point there.
• Short “in-between” periods while you move accounts or clean up your allocation.
• If market volatility ruins your sleep and you’d otherwise panic-sell.

The key is separating short-term safety money from long-term growth money. Cash/T-bills are for the first bucket, not the second.

Summary

Illustrative values consistent with the chart. Real-world results will depend on the exact period and instruments used.