From my US News article, linked below:
Retirement savers have long heard the axiom “cash is king.” Certainly, managing cash flow is a key tenet of retirement planning.
In addition, it’s prudent to hold some cash in an investment portfolio. That allows an investor the flexibility to add to a position if an opportunity arises, gives some wiggle room while trades settle, and can offer a psychological buffer for investors with lower risk tolerance.
Typically, financial advisors allocate no less than 5% to cash, and often an amount closer to 10% or even 15% or 20%.
But during volatile market conditions, does it make sense to use a higher-than-normal cash allocation to preserve capital? Here are some factors to consider when determining how much cash to hold in your investment portfolio:
💰Cash can be a drag on performance
💰Cash holdings in actively managed funds.
💰Cash equivalents are your friend.
💰Risk tolerance can affect cash balances.
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