With cash and bond yields at their highest levels in over 15 years, many investors wonder if they should favor these higher-yielding options over stocks.

Here are answers to some questions investors might have about how to approach asset allocation in an era of 5% CD yields.

What’s the problem with holding extra cash?

The yields on cash products are compelling today, and cash investors do not have the potential for principal volatility. That’s particularly appealing because we’ve seen losses for some bond investors over the past few years and so far in 2026. Additionally, our annual diversification research has shown that cash is a solid diversifier for equities, on par with bonds.

But cash yields are fleeting: Cash investments are short-term loans to various entities. If interest rates drift down, the high yields may disappear as higher interest rate loans are retired. If you lock in a longer-term CD, you can benefit from that high yield longer.…