How much cash to hold? It's a topic investors can go round and round about. My thinking is that I shouldn't try to time the market in top-down fashion. Instead, I strive to be fully invested with my investment portfolio from bottom-up stock picking. If I can't find enough stocks to accomplish that, I'll wind up holding cash as a natural result.
I'm currently about 15% in cash. But most of my current holdings would not be bought at their current prices. So I'm among those who believe the market is fairly valued.
I got to thinking about this when coming across an article in The Globe and Mail in Canada:
For example, the Mackenzie Cundill Global Balanced fund, managed by famed value investor Peter Cundill, lists a 45-per-cent weighting in cash as of Jan. 1. He invests about half the fund's $730-million in a broad spectrum of stocks in several sectors and countries. Roughly $350-million is at Mr. Cundill's discretion if he finds undervalued investments with long-term growth potential.
Note the fund described in the piece is a "balanced" fund by Cundill. I suspect his flagship Value fund may not be holding quite that much cash.
That's a good question that I quite frequently asked myself. Right now I am at the 40% mark. Just can't find enough investment ideas that give me the comfort level. My question is what do you do with your cash? I have my INGDirect Savings linked directly to my Ameritrade account, so any access cash I would push to the savings account to earn 4.5% yield. I wonder if there are any other options I can play with that gives me easy access to my fund when I need it fast while earning a higher yield.
Posted by: Jim | January 18, 2007 at 07:18 PM
Jim: I just leave the cash in my investment portfolio in my broker's money market fund.
Assuming you do what many people do, have a separate emergency fund worth three to six month's living expenses, you might shop around. Emigrant Direct and HSBCdirect are advertising savings accounts earning 5.05%. But I stress those funds are outside your investment funds.
Posted by: John | January 19, 2007 at 12:33 AM
Neat site, just stumbled on it
Posted by: pesa | January 20, 2007 at 04:25 AM
pesa: Thanks, I hope you'll stop by regularly.
Posted by: John | January 21, 2007 at 07:16 PM