This is what it costs investors to stay in cash — and what to do instead

While money markets and certificates of deposit are still producing solid yields, sitting in too much cash could be costing investors money. Investors have piled into cash equivalent assets in recent years — and they have stayed despite the central bank's decision to cut the federal funds rate three times last year. The Fed's last decrease was in December and it's now on hold as it watches economic data and the impact of the Iran war. "In an environment where cash has grown both tactically and structurally, the opportunity cost of remaining sidelined could be rising," BlackRock warned in a report last week. Money market fund assets were at $7.63 trillion as of the week ended April 29, according to the Investment Company Institute . In prior rate-cutting cycles, the one-year average return on cash after cuts began following a pause of three months or longer was about 2.8%, a BlackRock analysis showed. The firm used the Bloomberg US T-Bills 1-3 Month Index to represent cash. In contrast, bonds have historically delivered 7% to 9% over the same period, BlackRock noted. Even as recent events have made it difficult to predict how the Fed could proceed on rates – and a trio of central bank officials recently disagreed with hinting that the next move could be a cut – BlackRock is telling investors they should at least hedge their bets. …