Investment Review day 38 of 50: Cash
Could the ‘dead money’ in your portfolio actually be the key to your next big investment win?
Cash is definitely not dead money, and that’s especially true when you can park a chunk of it in short-term government bonds, currently earning over 4%.
But that cash isn’t just sitting on the sidelines – it’s a strategic position! In a mature portfolio where you’re simply not able to meaningfully add new money, cash gives you the flexibility to buy a stock without selling off other assets. You really don’t want to force yourself to trade when you don’t need to – that cash allocation acts as a buffer, separating your buy and your sell decisions.
You can also think of your cash allocation like a risk dial. Increase it when stocks seem expensive (I’ve held as much as 25% at times, and I’m currently over 18%, which perhaps tells you a lot about how I’m thinking about the market right now), and lower it when stocks are on sale (I’ve gone as low as 5% cash).
I’m semi-retired, so my cash allocation also covers my bills, and that means I don’t even need to chase dividends.
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I’m putting my holdings under the microscope. Over the next 50 days I’ll break down my whole investment portfolio. Wins, losses, and the ‘why’ behind it all. And on day 50 I’m going to share my full portfolio so you can see how my strategies played out in the real world over the last twenty years and what we can all learn together. Follow along for the journey! #StockAnalysis #50daychallenge #cash #volatility
