The price of a reserve
This is an opportunity-cost comparison. It does not identify an optimal cash allocation or predict the next decade.
WEALTH MANAGEMENT / 01
The Cash Drag.
What did liquidity cost—and when did it help?
A historical study of cash-like reserves, Canadian stocks and bonds. Explore the balance between money available today and purchasing power tomorrow.
HISTORICAL OUTCOME
Purchasing power over time
Selected portfolio · ending value
Difference vs. 0% cash
Same withdrawals and datesWorst calendar-year return
Before withdrawals · nominalYour allocation0% cash · 60/40 baseline
View annual balances
| Year-end | Your portfolio | 0% cash baseline |
|---|
THE TRADE-OFF
Different reserves. Different outcomes.
Same starting wealth, withdrawals and dates as your scenario. Returns and drawdowns exclude withdrawals; balances include them.
| Cash-like weight | Ending value¹ | Annualized return² | Worst year² | Year-end drawdown² | Unfunded withdrawals³ |
|---|
¹ Uses your selected display units. ² Nominal investment returns. Drawdown is the largest decline from an earlier year-end peak, including the initial investment. ³ Inflation-adjusted to the start of the selected period.
FROM CHARTS TO DECISIONS
Liquidity has a purpose. Give it a budget.
Protection is period-specific
Cash helped soften this particular loss. Annual observations miss intrayear stress, including the sharp 2020 market sell-off.
Start with spending needs
For an adviser, the practical conversation starts with planned spending, income stability and a client’s capacity to tolerate losses—not an arbitrary cash percentage.
THE WEALTH MANAGEMENT IMPLICATION
Separate near-term commitments from long-term capital.
Use a reserve target tied to actual spending commitments, then review the opportunity cost of keeping additional assets liquid. This model makes that cost visible. It does not test whether drawing from a cash reserve first improves retirement outcomes: withdrawals here come from the whole portfolio before annual rebalancing.
TRANSPARENT BY DESIGN
What this study measures.
Historical scenarios, using ten annual observations per asset. All returns and balances are in Canadian dollars. “Real” means adjusted for Canadian consumer-price inflation; it is not a forecast of a household’s personal cost of living.
Download annual source data ↓Assets & primary sources
Stocks: Vanguard FTSE Canada All Cap Index ETF (VCN). Bonds: Vanguard Canadian Aggregate Bond Index ETF (VAB). Cash-like: iShares Premium Money Market ETF (CMR), an investment fund rather than a bank balance.
Annual NAV total returns, with distributions reinvested, transcribed from the 2025 management reports: VCN, PDF page 4, VAB, PDF page 4, and CMR, PDF page 6. Inflation: December all-items CPI, not seasonally adjusted, series v41690973, from the Bank of Canada / Statistics Canada. December 2015 baseline: 126.5 (2002 = 100). Retrieved September 17, 2026. Provider links may later point to newer reports.
Calculation rules
Each year: inflate the requested withdrawal using CPI through the previous December; withdraw at the beginning of the year (limited to available assets); rebalance the remaining assets to the target weights; apply that year’s weighted total return. No contributions. Cash weight stays constant. Real ending value equals nominal value divided by ending CPI / starting CPI. The 0% cash baseline uses the same rules with 60% stocks and 40% bonds.
Fund expenses are already reflected in returns. No additional advisory fees, personal taxes, transaction costs or bid–ask spreads are modeled. Published returns are rounded to two decimal places, so compounded results are approximate.
Limits & next research steps
This is a domestic Canadian portfolio, not a globally diversified wealth-management plan. One historical decade cannot establish a safe withdrawal rate or a future probability of success. Annual data cannot measure the deepest market loss or cash needs within a year. CMR’s fees and investment mandate changed during the sample; this uses the fund’s realized history.
A stronger next study would add monthly total returns, international assets in CAD, account-specific Canadian taxation, advisory fees, and explicit cash-first versus pro-rata withdrawal policies. Test rolling start dates and adverse return sequences before drawing retirement-planning conclusions.
Inspect the underlying annual observations
| Year | VCN return | VAB return | CMR return | December CPI | Dec.–Dec. inflation |
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