brewer12345
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Mar 6, 2003
- Messages
- 18,085
I think you are right that some posters have good reasons to hold a lot of cash. I just think that some are doing themselves a disservice by doing this. They are lowering their long term portfolio return.
However, I really like to optimize things and have to remember not everyone is like that. And actually this just gives some money to the banks (or wherever that excess cash resides) to recycle to stronger investment uses. So it's probably a wash to society in the end. A comforting thought to me.
I like to optimize, too. I have some portfolio cash on hand (7% or so) simply because I am waiting on opportunities to put it to work.
I also keep an emergency fund equal to a year and a half of expenses. However, to minimize long term performance drag I have the bulk of my e fund in I bonds and CDs, with a relatively small amount in a savings account. I view the e fund as part of my fixed income allocation. Why do I keep this much in safe stuff? After getting my ass handed to me in the crash, I have developed a healthy interest in cutting off extreme tail events. So I keep a bigger than average e fund, have worked down concentrations in my portfolio, keep much closer track of allocations, and have done other things (healthy supply of emergency food and water on hand, have plenty of shotshells, thinking seriously about buying a generator, etc.). I still live my normal suburban salaryman life, but all of this stuff gives me comfort that things are mitigated somewhat even in very nasty downside scenarios. The world can be an uncertain place and we are largely on our own to deal with it.