It's not surprising we've gotten numerous questions about "de-risking" and/or keeping more money in T-bills. There is a lot going on in the world that makes investing seem dangerous - multiple wars, tariffs, tension with China, high US stock market valuations, the list goes on and on. So what should be done?

Answering that question starts with clarity on why we are investing in the first place. The ultimate goal for the vast majority of investors is to protect and grow purchasing power. By definition, this means that portfolio returns have to be measured in the context of inflation and taxes, both of which eat away at the amount of stuff you can ultimately buy. This implies an interesting definition of "risk." Standard definitions of risk focus on how volatile an asset is, but a better definition is "how likely is the asset to help you protect and grow your purchasing power?"

T-bills currently yield 4.27%. That is an after-tax yield of roughly 2.7%-3.4%, depending on your income tax bracket. The latest reading on core inflation is 2.9%. So basically, for most investors, T-bills are just barely maintaining purchasing power...for now. Markets are currently pricing that T-bills will be ~3.6% by the end of the year, which is 2.3%-2.8% tax-adjusted. Meanwhile inflation is expected to be stable around 3%. In other words, for almost everyone reading this, T-bills are starting to slowly leak out purchasing power like a deflating balloon. They guarantee failure to achieve the ultimate goal of investing - it is hard to imagine an asset riskier than that!

The reality is that there is always scary stuff going on in the world, and the track record of a well-diversified portfolio outperforming T-bills - as well as inflation - over any meaningful time period is almost unblemished. Our advice for most is to ignore the headlines and keep your money invested.