Holding cash during a wobble looks timid. It is not. It buys the one thing a falling market takes away, which is the ability to choose when you sell. For business owners whose personal portfolios and company balance sheets are tangled together, that choice can decide whether a slump is survivable.
The prompt is a sharp column from Mark Lister, investment director at Craigs Investment Partners, who describes a bit of a wobble across financial markets, with tech stocks hit by hot inflation, rising bond yields, stubborn oil prices and worries about AI overspending and a possible memory chip glut. “This could turn into a bigger sell-off or the volatility might blow over quickly. It’s impossible to say,” he writes.
Buy the dip has never been properly tested
Lister’s real point is generational. Someone turning 40 this year was 22 when Lehman Brothers collapsed. Everything they know about markets comes from shallow, fast corrections, and the numbers are stark. Lister calculates that the 25 S&P 500 corrections before the GFC averaged a 21.5% fall over 8.2 months, while the eight since, excluding Covid, averaged 16.7% over just 3.6 months. Covid’s 33.9% plunge took 33 days and was recovered in about six months thanks to an extraordinary policy response. The GFC, by contrast, delivered a 56.8% drop over 17 months and roughly five and a half years to get back to the old high.
A slump measured in years, he warns, requires more financial capacity and much more emotional resilience. His advice is to hold enough liquid funds to avoid becoming a forced seller at depressed prices.
Business buffers have been quietly draining
That advice is aimed at retail investors. It applies with more force to company balance sheets. The Reserve Bank’s May 2026 Financial Stability Report finds business deposits have fallen as a share of GDP over the past three years, particularly for smaller firms. The post-pandemic cash cushions are largely gone, and the RBNZ notes low recent profitability has left businesses more vulnerable. Banks, meanwhile, sit on capital well above pre-GFC levels.
The backstop has shifted too. Back in 2024, the RBNZ, through then-general manager Karen Silk, announced the end of the abundant liquidity era, saying its new framework placed greater onus on market participants to manage their own cash needs. Translation: do not expect a Covid-style flood of central bank liquidity to rescue your working capital next time.
Banks themselves are held to hard rules. Their minimum core funding ratio was restored to 75% in January 2022 after a temporary Covid cut, alongside mandatory one-week and one-month mismatch tests. Most owner-directors impose no equivalent discipline on themselves, and many lean on bank credit lines that can tighten exactly when they are needed.
The old hands said the same thing
None of this is new wisdom, which is rather the point. In 2008, Lister himself, then head of research at ABN Amro, was running a defensive slant with more cash than usual, while warning against riding the market all the way down and then panic selling. In 2019, Mercer’s David Scobie quoted Warren Buffett on keeping enough cash so that nobody else can determine your future. That line is the whole case for a business owner.
Cash is a tool, not a hiding place
The counter-argument deserves respect. Cash drags on returns over time, and as central banks cut rates, deposit yields fall with them. JPMorgan Asset Management argues that high-quality bonds, not cash, have historically been the better diversifier for long-term portfolios. The Financial Times has noted that part of cash’s appeal is emotional rather than rational, even while conceding it provides genuine optionality.
Reacting to every headline is also a mistake. In 2022, BusinessDesk reported analysis of 26 US bear markets since 1929 averaging nine months each, with advice against panicked portfolio changes once the damage is done.
So the answer is not to dump shares. It is to separate decisions. Money the business may need in the next 12 to 24 months for payroll, tax, suppliers or a soft trading patch should not be sitting in equities, and it should not depend on an overdraft the bank can reprice. Long-term savings can stay invested precisely because that buffer exists.
What owners should do before it gets ugly
Run the test Lister suggests, but at the company level. If revenue fell 20% and markets took three years to recover, how many months of runway does the business have without selling shares, assets or equity at the worst moment? If the answer is a few months, that is the risk, not the share price.
This wobble may blow over within weeks. It may not. Owners who hold a little more cash than feels comfortable will not be the ones forced to sell the business, or the portfolio, at the bottom. They may well be the ones buying.
Sources
- NZ Herald: Buy the dip – Why investors should prepare for a prolonged sharemarket downturn (2026-10-25)
- NZ Herald: Don’t stash your cash under the mattress yet, say analysts (2008-09-30)
- interest.co.nz: Contemplating cash – Return of the King? (2019-08-14)
- BusinessDesk: How to survive a bear market (2022-06-24)
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