The Cost of Waiting

When confronted with making a decision in uncertain market conditions, many investors choose what they believe is the more conservative option. However, making investment decisions based on the perception of near-term market risks may imperil the ability to pursue long-term goals.

Investors who wait to invest and leave their assets in cash or lower-yielding short-term investments for an extended period of time are not choosing a cost-free (or “risk-free”) strategy. If yields decline, the opportunity to be invested at current rates may be lost. If rates go up, waiting may be worthwhile, but if rates do not go high enough, investors run the risk of not being able to replace the income they gave up during their waiting period.

If you do wait, how much could it cost you? Compare two hypothetical investors:

  • Investor “A” makes an investment today, purchasing $100,000 insured certificate of deposit due in five years at a yield of 2.00% and priced at par.
  • Investor “B” wants to wait to get 2.50% on his money, so he decides to leave his money in a money market fund (currently at 0.10%), and he waits 12 months before investing.

For simplicity’s sake, these hypothetical comparisons assume that all investments are made at par and that money market rates remain stable for the entire 12-month period (This discussion does not account for investors who reinvest their interest earnings and would therefore be earning interest on their interest.). This hypothetical example is provided for illustrative purposes only and is not intended to represent a specific investment or portfolio.


Investor “A”


Investor “B”

Scenario 1

Investor “B”

Scenario 2




Year 1

Years 2-5

Invests Now




Rates Drop



Rates Unchanged






End of:

Cumulative Income


Cumulative Income

Cumulative Income

Required rate to “break even” with A in year –

Year 1

Year 2

Year 3

Year 4

Year 5






















  • If rates drop or if rates hold steady at 2.00% (Scenario 1), investor “B” would not be able to replace the income he gave up in year one.
  • An increase in rates to 2.50%(Scenario 2) would favor Investor “B,” but only if he is able to invest his money for the remaining four years of the holding period at a yield of 2.48% or higher—a lower yield would not generate enough cumulative cash flow to offset the lower earnings in the first year.

The cost of waiting goes up if:

  • You wait longer to invest;
  • Rates do not go up enough;
  • Rates remain unchanged or decline

In addition, this scenario looks at a $100,000 investment. The disparity would be magnified 100 times if we were talking about a $10 million portfolio.

It is impossible to accurately predict if, when, and by how much investment yields will change, so it is impossible to know your cost of waiting—except in retrospect. Nonetheless, you should consider everything that is known about interest rate trends (over recent years and months, including how quickly interest rates seem to be changing) and how alternate courses of action could affect your ability to reach your goals.

Note: The information contained in this article is based on sources believed reliable, but its accuracy cannot be guaranteed. This article is for informational and educational purposes only and should not be relied upon as the basis for an investment decision. Consult your financial advisor, as well as your tax and/or legal advisors, regarding your personal circumstances before making investment decisions.


Gary Tantleff is the managing director of investments at the Credit Union Advisory Group at UBS. He can be reached at 877.269.1776, or by email at 

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