Cash drag

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Cash drag is a diminution of return caused by a cash position in a mutual fund. A mutual fund typically holds a cash position to facilitate redemptions and pending investments. Since underlying securities of a mutual fund, especially stocks, often have better long term returns than cash, a cash position tends to reduce the performance of the fund.

Data

Monthly reporting of mutual fund cash positions are posted at ICI: Trends in Mutual Fund Investing [1].

Annual cash balances for US equity, balanced, and bond mutual funds are provided in the table below.


google drive spreadsheet [2]


References