5 ms·

25% cash is ludicrous and irresponsible. Cash has historically been a terrible 'investment', especially since most central banks have maintained a policy of cre

• swendoog 9y ago
  Possibly holding cash is useful for when you need to quickly capitalize on a drop in the market?
  • tanderson92 9y ago
    One can do that with treasuries or T-bills which historically have earned a real return. In a crisis one often finds that treasuries are negatively correlated with equities which can be a boon.
    • tome 9y ago
      T-bills are what Harry Browne means by "cash".
  • brndnmtthws 9y ago
    Bonds are better suited for that purpose, however it's still preferred to just hold stocks over the long term. Holding bonds provides stability at the expense of drag.
• snikeris 9y ago
  I think this article may clear some things up for you: https://portfoliocharts.com/2017/05/12/understanding-cash-will-make-you-a-better-and-happier-investor/ https://portfoliocharts.com/2017/05/12/understanding-cash-wi... Harry's 25% cash isn't dollar bills, it's treasury bills, which have held up to inflation.
  • SilasX 9y ago
    Or you could apply the deep understanding you gained from the article to untangle the misconception you believe the parent was harboring, rather than ask everyone, on faith, to spend fifteen minutes figuring it out for themselves, when they might not even get the insight you want them to. >Harry's 25% cash isn't dollar bills, it's treasury bills, which have held up to inflation. Short-term ones haven't for last ~10 years, especially if it's a taxable account.
    • snikeris 9y ago
      The argument of the OP almost exactly fits this lead in to the article: > I hear some version of this argument all the time: The opportunity cost for holding cash is too high. It earns virtually nothing, and you’re guaranteed to lose money to inflation. Just get over your fear and buy stocks!
      • SilasX 9y ago
        I get that the article promises to refute what the OP said, but if it really provided a relevant insight, you should be able to summarize the insight so as to contribute to the current discussion and let others know whether they've already heard the argument, or what crucial assumptions it makes, and whether the refutation really gets at the core point of the parent's objection (or is just nitpicking). And save the thousand people 15 minutes of figuring it out. It would be much more helpful to say something like "having an investment of stable value can decrease the volatility of the returns as you balance in and out during the market ups and downs, and improving the risk-adjusted returns, which back-testing can demonstrate". (I don't know if that's what it said, but that's an example of contributing the insights back to the discussion.) And if the article really did provide insight, wouldn't it be easy to produce a paragraph like the above?
        • snikeris 9y ago
          I appreciate you schooling me on how to better contribute to the discussion. This was my attempt at what you're discussing (admittedly appended perhaps after your initial comment): > Harry's 25% cash isn't dollar bills, it's treasury bills, which have held up to inflation. OP seemed to be under the misconception that cash meant dollar bills under the mattress. The article addresses this in the section beginning "To explain, I think it helps to start with the definition of cash..." OP seemed to be under the misconception that cash responds poorly to inflation, which the article also addresses.
• pdog 9y ago
  Berkshire Hathaway currently has a $100 billion cash stockpile. There have been multiple times in Mr. Buffett's career when he waited for better investment opportunities by holding cash. Besides, cash isn't so bad. If you roll over short-term Treasury bills, you basically keep up with inflation.
• tome 9y ago
  Cash earns interest so it's not as terrible an "investment" as you make out, but its real strength comes from being able to buy into crashes.
• loeg 9y ago
  Nothing in TFA mentions 25% cash.