Higher interest rates are tough for homebuyers, but if you’re fortunate enough to have a little money in the bank, they also mean you can earn a return on cash. And in a post-pandemic world, contending with conflict in Israel and Ukraine, it makes sense that investors want to play it safe on the sidelines with money market accounts and CDs.

But to protect long-term returns, it’s important to fight that urge. A guarantee of 4-5% in a money market account is great for short-term savings, but that’s not where long-term investments belong. Remember, the long-term average for the stock market is about 10%, but that’s only if you stay in the market.

You may be thinking, “I’ll take advantage of these higher interest rates now and just get back in the market later when interest rates have gone down.” That sounds logical on the surface. But think about what that really means when considering the effect of interest rates on stocks–”I’ll sell stocks when they’re cheap and just buy them back when they're more expensive.” Not a great strategy.

Consider interest rate and stock moves last week. The two-year treasury yield dropped from over 5% to 4.8% while the S&P 500 surged 5.9%. Granted, you had to endure a 10% drop from July highs, but after last week, the S&P 500 is still up over 13% year-to-date. It’s a bumpy ride, but that’s what we sign up for as long-term investors.

In 2008, during the height of the Global Financial Crisis, Warren Buffett said, “Be fearful when others are greedy, and be greedy when others are fearful.” Unfortunately, this strategy never feels comfortable at the moment. But it captures the counter-intuitive action necessary for long-term, successful investing.

Josh Norris is an Investment Advisory Representative of LeFleur Financial. Josh can be reached at josh@lefleurfinancial.com.

Josh Norris, CPA, CFP, CFA is the managing member of LeFleur Financial, a wealth management and tax advisory firm.