You never know what life can throw at you…
The market could fall 50% and give you a rare shot to buy dirt-cheap stocks. You could discover a lucrative business opportunity. Or a huge medical bill or lawsuit might blindside you.
That’s why you need cash.
You see, cash is the universal asset class because everyone needs it. And at PBRG, we like cash because it provides optionality.
So how much cash should you have ready to cover life’s unpredictable events?
Today, I’ll tell you how much you should keep on hand.
Cash Gives You Stability
Cash is safer than most other investments. But holding cash still comes with risks…
The U.S. dollar can (and does) devalue relative to other currencies. And there’s always the risk that inflation will eat away at your cash savings.
On top of that, if you keep your cash at home, you could lose it to theft or in an accident. If someone burglarizes your home or it burns down… there goes your retirement.
So the idea that sitting on cash is riskless is a fairy tale. That being said, cash can stabilize your portfolio in volatile times.
Let’s say you have a $100 portfolio – with $50 allocated to cash and $50 to stocks. If your stock portfolio goes down 10%… your stock position is now worth $45.
But your overall position is $95 ($50 in cash + $45 in stocks). So your portfolio has only lost 5%. And if your stock portfolio loses 20%, your overall portfolio only goes down 10%. So cash can ballast your wealth during a market pullback.
This is just hypothetical… But it demonstrates the power of asset allocation. That’s the process by which you spread your wealth across different types of investments.
Still, it doesn’t answer how much you allocate to cash.
I’ll get to that next…
How Much Cash Should You Hold?
At PBRG, we use a highly diversified portfolio. It includes conservative investments… speculative plays… portfolio hedges… and true alternative assets.
And it’s worked spectacularly…
For instance, since launching The Palm Beach Letter on April 13, 2011, our recommendations have averaged annual returns of 123.6% through June 30, 2019.
But that’s all in the rear-view mirror now. We’re only looking to the future…
It’s a new decade. And we expect the market environment to change with it.
That’s why Daily editor Teeka Tiwari recently overhauled our asset allocation model… One that will continue to outperform the market in the 2020s.
We streamlined it by renaming some asset classes… and creating new categories to reflect today’s market realities.
The asset classes now include cryptos, collectibles, private markets, as well as old standbys like gold, real estate, stocks, and bonds – and of course, cash. (Palm Beach Letter subscribers can read our annual asset allocation guide right here.)
While cash remains an asset class, we did adjust how much we allocate to it. We now recommend you keep up to 10% of your portfolio in cash.
That includes checking and savings accounts, money markets, CDs, and certain cash-like ETFs and mutual funds.
You should always keep some cash on hand. Whether it’s for an emergency, a bear-market buying opportunity, or something else, you’ll be glad you had some.
For example, you can use your dry powder to scoop up quality crypto projects… or cannabis stocks beaten down by negative sentiment. When these assets recover, they’ll make 10 to 100 times your money – and in some cases, even 1,000 times.
Whatever life throws at you, cash typically “meets the need” better than anything else.
Managing Editor, Palm Beach Daily
P.S. Because of our track record, Teeka’s been called America’s No. 1 investor. And as I mentioned above, our success is due to proper asset allocation.
Now, Teeka’s putting his track record and reputation on the line to reveal what he believes will be the top-performing investment of the decade.
We love this idea because it crosses asset classes. In fact, Teeka’s so convinced of this idea’s potential, he firmly believes it’ll be the single-best place to grow your money in the next 10 years.
It’s a groundbreaking technology that’ll disrupt numerous industries – from healthcare to national security. And you can get the inside scoop right here…