According to a widely reported study released by a Canadian investment bank earlier this year, Canadians are sitting on $75 billion in excess savings “Cash”. That’s a lot of money earning interest at today’s low rates.

Fund managers even have a name for this phenomenon. They call it “cash drag” — too much cash can literally drag down performance over the long term.

Balance cash with growth

How much cash is too much depends on your specific goals and your time horizon. For example, money you have set aside for household expenses and emergencies is fine in a money market fund, where you can access it quickly.

But the longer you can stay invested, the more time you have to ride out the temporary ups and downs of the market and benefit from the growth potential that equity funds can provide.

Built-in risk management

One of the great things about mutual funds is how they’re designed to help mitigate risk.

Here’s how:

• Diversification. Mutual funds offer a world of choice across different market sectors and industries, and every fund contains a diversified mix of professionally selected investments.

Regular investing. With the low minimum purchase amount for many funds, it’s easy to invest small amounts on a regular basis. You can even set up a pre-authorized purchase plan and make market fluctuations work for you: You automatically buy more fund units when prices are low and fewer when prices are high.