Hi all

this is a huge subject and an important one. i spend alot of time thinking about this given capital preservation is critical to me. in fact i think i could write a book on it but for now make three points

1.cash holding= who are you as an investor, ill take two extremes, the 25yo with $50k in the market can take much more risk so less cash than say, a retiree with all their assets in stocks and cash who should hold more cash since capital cannot be replenished. there is then the thousands of iterations in between.

2. the next point is how risky is your portoflio. this is much more difficult to asses than u think. we have seen unusually positive market condiitons for years and risk IMHO is hidden. i would look at the performance of your portfolio between Oct 2018 and Dec 2018 as well as Feb to end March 2020 and see how it fared. these have been the only real tests of the market in the last 5 years although both were transitory. (God save the Fed). also the blackswan of C19 may not be replicated in its mix but it is all we have as a real world example. if your portfolio was smashed (down over 50%) then you are carrying alot of risk and should have a plan for the level of cash holdings.

3. this brings me to the final point, i dont think it is a quesion of how much cash you hold per se but how you plan to move it. that is, what would trigger a change in cash, eg what to sell, how much and how quickly. i have stocks identified that will go immediately if i can see signs of trouble as well as a % of the portfolio. i have been watching a couple of seasoned US investors who are in the hyper growth, loss making, eye watering valuation type stocks that have rocketed over the last few years, no surprise -there are plenty of investors on that train. the interesting point is that these two realise they are trading in risk and have a plan to liquidate quickly if trouble emerges, which may be only a loss of momentum. one of them has already liquidated at least once this year and then reentered. i think that if you are carrying alot of risk you need to have plan to liquidate. one advantage that retail punters have over insto's is the abiltyi to move quickly and reverse course, very hard for insto's due to size and longer decisionmaking processes. use thsi advantage is my view.

The market has a habit of confounding consensus views. in 1987 the consensus was we would have a bear market like 73/4 (long and slow) so experienced guys would be able to get out unscathed. well we know what happened then. consensus now appears to be that a diversified collection of quality growth stocks will do well whatever. i dont take any comfort from market forecasts. at least have a plan to save your capital if the Fed changes its mind or at one point cant help the market.   tahnsk for reading my rant. 

I'm a little under 5%, very low, but then low rates renders cash expensive, particularly given the opportunity costs. As others have mentioned this keeps me on my toes and imposes discipline. Besides which I expect Aus markets to be supported by dividends rolling in, and there is a surprising surprising amount t of cash still out there, as this chart from Goldman, Sachs, shows:

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Hi All,

Thanks for the responses - the arguments for staying invested make sense. Certainly, conditions overall remain favourable for equities over the next 12-18 months. 

In saying that, a short sharp pullback is not completely off the cards. Markets are at ATHs and that is accompanied by stretched valuations with metrics like S&P 500 market cap to GDP at historic levels. 

I'm not trying sound bearish - rather I'm just a bit more cautious/alert than usual. 

Hi All,

Would love to get some thoughts on how people are currently positioning their portfolios with respect to cash. With markets at all time highs, I'm sitting on a 20% weighting (real life portfolio). It's somewhat conservative, but it does provide me with some flexibility to navigate any downturn.