For those of you anti cash in your portfolio:
Looks like a $1.8 growth or so. The US inflation is about 2.5% this year, which is about the same as the treasury bond rate. Curious where the remaining growth is coming from
I’ll ask FT
It’ll be money market fund I assume - short term cash accounts (6 month term acc’s etc). I’ll find out what fund(s) though.
I didn’t mean to apply that burden on you though, simply was curious
And, of course, this graph is very much biased to have found the point where most other securities plunged. The market will always have fluctuations, up 80% up or down sometimes, but I doubt there has ever been a period in history, where cash could outperform stocks for at least a 5-years’ range.
Looking in long term which is my investing strategy I think it would be impossible to say that cash would outperform consistently. Thinking retirement terms ETF’s etc. will more accurately match the inflation rate. That’s what I try to keep my mind set as so that I don’t worry about short term fluctuations
I agree in terms of absolute return - if you have a 30 year horizon then you can take the hits and probably come out on top.
However, in terms of risk-adjusted performance holding cash in a portfolio currently is providing strong returns for the volatility taken. In the past bonds (gov and corp) have provided this balance, but currently they seem to track with equities and not provide a diversifier.
It also allows for cash to be deployed in downturns or so called ‘buying opportunities’, which can help with Money-weighted returns, rather than time-weighted returns
Yeah very well said. I completely agree with what you say there. Having other fixed interest savings accounts and spare cash accounts is a very safe and smart idea. Like you say, when the price dips you have this cash to invest if you so desire.
The markets are very volatile at the moment. The uncertainty of Brexit still holds true to this. Holding cash could definitely be a safer option for a little while. Hopefully we may all see some nice returns.
Feel pretty good that I sold my positions near the all time highs.Buffet is sitting on 30%+ in cash and there is a reason for that.No one can time the market , but I just dont feel comfortable enough to be invested at those levels.In the meantime my money is in a good old savings account waiting for the right time to be deployed.
For newer investors the dollar cost avaraging is the best system though.Once im back in the markets ill stick to it aswell.
Cash is useful to have though, because it provides opportunities and can help cushion the impact of large downturns. Then in a downturn instead of watching your stocks go down, you can buy stocks you think will do well long term at a good price. I try to have some cash in my portfolio at all times, and increase it a bit when things are going well, then decrease it when things are going badly.