With so much uncertainty - should I invest or hold cash?

Q: I’m nervous about investing while the world feels so uncertain. Should I invest or sit on my assets?

A. When the news feels unsettling - whether that’s due to geopolitical tensions, economic pressures, a new prime minister, conflict or market volatility - it’s completely natural to question whether you should invest or hold back.

As you might expect, there isn’t a one-size-fits-all answer. It depends on your goals, your timeframe, your need for cash, and how comfortable you are with risk. While I don’t know your personal circumstances, there are a few broad principles that can help you think it through.

If you’re investing for the short term - say you’ll need the money in the next few years - keeping a certain amount in cash or lower-risk assets can make sense. Markets can be unpredictable over shorter periods, and protecting your money may be more important to you than growing it.

We usually suggest keeping around three to six months’ living expenses set aside, just in case. This emergency fund can act as a useful buffer for the unexpected. It can also help avoid a situation where you’re forced to sell investments at a difficult time, potentially locking in losses depending on how markets are performing.

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For longer-term goals, such as retirement or investing through an ISA, history shows that staying invested has typically been more rewarding than trying to wait for the “right moment”. Markets move in cycles, and periods of sharp market movement are a normal part of investing, making it hard - even for experts - to time the market consistently.

It’s also worth remembering that uncertainty can create opportunity. Investing during market dips, whether as a lump sum or gradually over time, can mean buying assets at lower prices. This is why many investors use strategies such as regular investing, sometimes called pound-cost averaging, to smooth out market ups and downs.

One important risk to keep in mind is sequencing risk. This is where the timing of market movements becomes particularly important when you start withdrawing money from your pension.

Sequencing risk means that if markets fall early in retirement, taking withdrawals at that point can lock in losses and reduce how long your money lasts. Keeping some cash set aside can help cover your spending during those periods, so you don’t have to draw from investments when their value is down. If you’re approaching that stage, it may be worth reviewing how your investments are positioned.

• Read: What is sequencing risk?

The answer is usually less about trying to predict what markets will do next, and more about making sure your money is positioned in a way that reflects your goals, timeframe and attitude to risk. For many long-term investors, a well-diversified portfolio aligned to their personal circumstances - and the discipline to stay invested through uncertain periods - can be more effective than waiting for the perfect moment to invest.

If you’re unsure, it can help to revisit your goals. Or you might like to think about talking to a financial adviser.

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• Read: Not sure how to invest? Start here
• Read: What is a Stocks and Shares ISA? The basics
• Read: How ISAs will change in 2027

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.