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If you don’t know what the effect on your 50/50 decision would be depending on how the stock market performs, why are you so set on that decision as to not want
by corin_ 9y ago
If you don’t know what the effect on your 50/50 decision would be depending on how the stock market performs, why are you so set on that decision as to not want advice if it were offered? If you don’t know the effects, how do you know it wouldn’t be better to be 55/45, or 45/55?
Tyinguq gave you a good answer already, but to add to what s/he said: anything kept in cash will almost certainly earn less than inflation, meaning that with cash you’re losing, even if the numbers appear to go slightly up.
There are plenty of times when it’s worth taking this hit for the benefits of cash. Maybe you want the cash as an energy fund to cover ‘x’ months of living costs should you lose a job, maybe you’re planning a big purchase in the near future, maybe you think the stock market is about to crash and want to invest when it’s at or near its next major low point, maybe you’re about to retire and want some of your wealth extremely low risk, I’m sure there’s plenty of other reasons. (If you’re trying to time the market and buy more when it’s cheap, you might do much better than investing it now, or you might do much worse, but that’s a whole new topic).
Unless a specific reason, in the context of however big or small your wealth is, means that you specifically need exactly 50% in cash, you might consider investing more in something that can give better returns than cash. If you’re trying to hedge against a stock market crash but think historical patterns in the finance world will continue, maybe bonds are a good option. If you’re worried that there’ll be a wider downtown then you might consider precious metals or even cryptocurrency. And maybe cash should be a part of the hedge, but maybe not all.
Disclaimer: I’m an amateur not a professional adviser, and I’m not advising you to do anything other than to consider why you think 50/50 is the best choice and whether it actually is or not.