Cash can sit perfectly still while the cost of holding it races ahead. Invest $20,000 at a hypothetical 8% annual return, and it becomes approximately $43,179 after 10 years. Leave the same amount earning nothing, and the missing growth reaches $23,179. Apparently, doing nothing can become surprisingly expensive.
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Cash still has a job
This isn’t an argument for investing the emergency fund or next year’s down payment. Cash protects investors from selling stocks during an emergency or market crash. Money needed within several years belongs somewhere stable, even if its return won’t make anyone leap onto the kitchen table.
The problem begins when long-term money gets the same treatment. Statistics Canada reported that consumer prices increased 2.8% year over year in June. If inflation somehow remained at that rate for a decade, an idle $20,000 would retain only about $15,200 of today’s purchasing power.
The Ontario Securities Commission’s Investor Office explains that cash and short-term bonds may suit short goals, while stocks offer higher return potential for long ones. A decade gives an investor more time to recover from market declines, although it doesn’t eliminate the possibility of losses.
Time does the heavy lifting
The first year of an 8% return adds $1,600. By year 10, the same rate adds more than $3,000 because previous gains are producing gains of their own. That accelerating effect is why compound growth rewards time far more generously than dramatic market timing.
Once emergency savings and near-term spending are covered, investors still need somewhere sensible to put the remaining cash. The answer doesn’t require predicting the next ten-bagger or interviewing every chief executive on Bay Street. One low-cost fund can handle most of the introductions.
Put 500 businesses to work
Vanguard S&P 500 Index ETF (TSX: VFV) tracks the S&P 500, giving Canadian investors exposure to 506 large American companies. Its holdings span technology, financials, healthcare, industrials, and consumer businesses, allowing one purchase to own far more earnings engines than most people have matching socks.
Vanguard lists a management expense ratio of only 0.09%. Its touted for its diversification, low turnover, and durable cost advantage. Those qualities make VFV a strong core holding for investors learning how ETFs work.
The underlying U.S. fund returned an annualized 14.8% during the decade through 2025. I wouldn’t plug that exceptional result into a retirement calculator and begin browsing yachts. The 8% headline assumption is deliberately more restrained, while the table below shows how widely outcomes can vary.
| ANNUAL RETURN SCENARIO | VALUE AFTER 5 YEARS | VALUE AFTER 10 YEARS | 10-YEAR GROWTH |
|---|---|---|---|
| 0% cash | $20,000.00 | $20,000.00 | $0.00 |
| 5% | $25,525.63 | $32,577.89 | $12,577.89 |
| 8% | $29,386.56 | $43,178.50 | $23,178.50 |
| 10% | $32,210.20 | $51,874.85 | $31,874.85 |
These are illustrations using annual compounding, no additional contributions, and no withdrawals. Markets won’t deliver identical returns each year, and none of the outcomes is promised. The purpose is to show how the cost of waiting expands when time and reinvested gains begin working together.
Bottom line
VFV’s10 largest holdings represent roughly 40% of assets, creating substantial mega-cap technology exposure. The fund also invests only in the United States, while currency movements affect Canadian returns. A market crash near the withdrawal date could leave investors wishing they’d moved upcoming spending into safer assets earlier.
I’d therefore keep emergency and short-term money in cash, then invest the portion with a genuine 10-year horizon. Buying VFV gradually may make the first step easier, although indefinitely waiting for a perfect entry merely replaces market risk with the very real cost of never letting the growth begin.
