What proportion of your portfolio is cash?
I'm interested in reading what proportion of their portfolio investors target to be cash, and why. It's an open question, I'm simply interested to learn how others view deployment of cash, whether they be 100% cash right now, or fully invested or somewhere in-between. I appreciate factors, for example, risk tolerance and investment style will apply for each investor. No doubt some fellow investors are more in cash now than a week ago!
For myself I always do have cash, the proportion fluctuates and I'm currently a third cash, have in the recent past been half cash, and my lowest proportion in cash, ever, would be about 10% - it's not very sophisticated an allocation however. As background, my investment stocks are typically Value Momentum and Quality Momentum, and in particular I've become very interested in stage analysis and companies undergoing change/ turnaround. I'm investing UK stocks only including dual listings.
I think I carry cash in my portfolio as a (psychological) comfort blanket, just as in life I don't like to go out without cash in the wallet, (yes I still use real money!) More practically I keep cash in the portfolio for deployment, though if I dip into my minimum 10% buffer then I have to restore it; and I also keep cash to protect the portfolio in times of volatility, but I'm conscious cash is otherwise not working so nothing is for free. I'd like to think my cash proportion as a target could be more sophisticated reflecting my view of the state of the market and macro factors that might have impact. I've no justification for my 10% rate, it's a bit arbitrary and could not defend the rate vs any other if challenged.
Any discussion/ comments will be very much appreciated.
Kind regards,
TEIN
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26 comments
It would be rude of me not to thank illiswilgig while he's here. It was your excellent knowledgeable posts which nudged me towards MS International (LON:MSI) a while back, so thank you.
Wolf of Small Street - not at all, you're welcome. I'm absolutely delighted that you found them useful. And thank you for all your excellent contributions - please keep them coming!
cheers
Mark
Some investors on this board run fairly low risk portfolios consisting of short dated gilts, money market funds and etfs as well as holding cash directly - so your question as to who is holding actual cash might not give a full understanding of porfolio risk.
Wolf has mentioned CSH2 and I know that a some here are holding Royal London Short term money market within ISAs.
At the end of last year it was possible to set up a blended portfolio of the above with some preference shares ( slightly higher risk) and have a realistic expectation of an 7-8% pa total return over the next 2-3 years.
I would think that the most overiding factor is the age of the investor. An 80 old man might not want to buy and hold and ride out the next economic cycle and hence prefer a higher level of cash.
Thank you very much intuitive6191, you're quite right, there's lots I don't understand! In particular I'm not, in investing terms, very familiar with funds and not at all familiar with gilts, hence my question being described 'open', learning for practical reasons but also for learning's sake. What I read on Stockopedia tends to be company stocks related so perhaps distorts my view of the broad spectrum of investors.
Best wishes.
Hi, I moved to 50% cash over the last few weeks as some of my portfolio was profitable, Monday was a great day to buy and invested 35% of free cash, will be looking to go back to 50% cash again over the next few weeks, basically take the money and keep agile.
Good timing! Thanks jonny71, are you a trader first and foremost or just flexing with the times?
I was fully invested, but started selling a few stocks that I felt had reached a level for the the moment. Avon Technologies (LON:AVON) being a perfect example. My largest holding is Warpaint London (LON:W7L) , so tempted to sell some of those. The finger has been over the button so many times, but I love W7L and they have been so good to me. Aiming for 10-20% cash. Thanks to WOSS I have also become interested in stage analysis.
Light bulb moment for me, I was doing okay before but stage analysis has changed much in a short time, despite everything outwith my control! Thanks very much Lefty99.
Cash. Almost none. Just enough to transfer my living expenses out which mainly comes from dividends as they come in. Putting a number on it.
Cash 0.15%
Though that might have doubled in the last few days as a dividend was due. Not looked yet. I'm expecting it to rise to around 1% within a few weeks - and then fall back to below 0.5% as I invest cash surplus to my modest needs.
But then I'm not a trader. Really not a trader. I don't come from a financial background - I'm a scientist and engineer by training and a small company director by experience. I hunt companies that I can likely hold for many years, possibly decades. I have a concentrated portfolio of around a dozen UK small caps mainly AIM listed. No more than 1 or at the most 2 new companies in a year. It's my thing. Everybody is different? Turns out that I sleep better with a more focused and concentrated portfolio than I do a more diverse one where I have less intimate research and knowledge of each company. In most cases over the long term newsflow is more important to the share price of these companies than macro concerns, so trying to sell and rebuy is good in theory, but actually more often counter-productive when I try to do it. That and my timing is always crap.
cheers
Mark
Excellent thread .... many thanks indeed Tein... just out of curiosity ( as I sleep badly when holding more than 0.1% cash ), is the old cliché true ' time in the market is better than timing the market '... or do any of you guys ( and ladies ) track the effect of holding a proportion of cash over the medium/ long term to prove a superior performance than just your stock picking by being 100% invested... obviously appreciate that most people like to hold a proportion of cash, but wondered if anyone is outperforming their own individual stock portfolios by consistently holding cash at the right times...
Long term Surveys of returns ( eg Barclays ) illustrate the outperforming asset class of Equities, but does anyone outperform by market timing as well... not just because their stock selections are superior?
Hope that this makes sense as a question, but I'm better with numbers than words ...
Many thanks indeed to all..
Cancun,
my reference to sleeping better was due to a more actively researched and concentrated portfolio - not the low level of cash.
But since you mention it, I guess I'd hold more cash if I thought I was losing sleep over it?
is the old cliché true ' time in the market is better than timing the market '.
I'm sorry I can't help you with that. It kind of misses the point for me. I'm a firm believer in the - in - efficient market hypothesis. Particularly at my end of the market. Since I expect most share price rises (and falls) to occur either slightly before or slightly after news is released - and I don't know when this will occur - then attempting to time the market is a category error for me? Probably I'm just weird?
cheers
Mark
Many thanks Mark...
I think that the lack of sleep , when holding too much cash , is a result of the thesis that the market rallies 76% of the time ( but the falls are ofter much steeper )...
Frequently I wish that I could hold more cash, as normally nearly every day throws up a new idea, or more likely, a 5% sell off in a holding on no news , allowing a top up opportunity... but the discipline of top slicing to finance the new buy sometimes helps...
Having spent 20+ years as an interest rate trader, I'm sceptical ( like most people ) that anyone can predict the macro economy consistently... but I was particularly curious re the investors on here with very good technical skills... I wondered whether they have increased their returns over time by holding cash , over and above their stock picking abilities.. I.e. timing the market as well ?
Thanks Cancun! Do you stay fully invested for income or because you don't like to see cash standing idle?
Hopefully some of the very experienced investors can give you a better response to your question than I can, and I'll be really interested in other replies too. Yes, trying to time using stage analysis makes a lot of sense to me. As Wolf implies here any idiot can grasp the principles, which make it a perfect fit in my case.
Staying fully invested Tein , predominantly because of the 76% theory , but also my scepticism re MY ability to time the market... however, I am wondering whether a) I should allow technicals to point the way and b) now that I'm studying the equity markets on a daily basis, will I recognise signs of over valuation myself....
Hello Mark, I imagine income investors might be more likely to be fully invested, especially given some of the yields on offer. I see another benefit in your buy and hold, which is that unless you're always scanning and researching, you potentially free up a lot of time for other things in your life! Best wishes and thanks for responding.
I am also about 50/50 but don’t anticipate changing that for the time being and happy to park on short term fixed deposit at 4.5% .
The Bestinvest account is an ISA. It pays interest on the cash remaining in your account without you having to do anything. The downside is they charge 0.4% annually , so in effect I`m getting 4.05%. I strongly recommend watching the Weinstein video, as his thoughts seemed to have moved on a bit since he wrote his book in 1988.
I'm no expert but think Weinstein's thoughts even moved this year vs. last! Adapting to volatility/ speed. I'm on with the video...., thanks again.
I am approximately 50/50 at the moment. My cash percentage maybe a little higher than most as investing is my only income so my living expenses come from that cash reserve. The cash isn't idle though it's all cash ISA's.
Hi Lloyd, good point, I wander round in the echo chamber of own head totally focused on my investment objective which is appreciation and from which I don't take income. I have other work and only focus on investments part time. Investors who do this for a living might need a different approach to cash as you've pointed out. Best wishes.
I currently have around 25% in cash as well, which is maybe too high, but like you I like the comfort of having something in reserve. However much of my cash is in a Bestinvest account and they currently pay annual interest of 4.45%, which I receive monthly, whereas my IG account, which pays no interest at all is nearly fully invested. I also generally follow Weinstein stage analysis to determine my cash allocation. When the FTSE 250 (or AIM All Share) index crosses resistance above the 150 day moving average I try to reduce my cash allocation (ie buy more shares), and when these indexes cross support below the 150 day moving average I try to increase my cash allocation. I probably should be more aggressive with this approach that I currently am, because breaking support below the 150 day moving average has led to big declines from October 2018, February 2020, January 2022, and few false signals. I am also looking now at applying Weinstein analysis to the 50 day moving average as well, as its quite a good profit taking indicator, and thinks its better to have 3 or 4 indicators combined to determine my cash allocation, so I can increase, decrease it as the market becomes more or less favourable, rather than having one big cash signal.
Hello Don't let the tail wag the dog and thank you, that's really very useful. I'm an ISA investor and not using a broker where I earn on cash, so that's been on my mind as something I need to rethink as once the ISA allowance is in it's stuck there, utilised or not. Your explanation of using stage analysis at a market level is where I think my mind has been drifting so I really appreciate you describing your process.
I'm a recent convert with Stage Analysis, it came as a light bulb moment when I realised it wasn't witchcraft! At a stock level I'm learning to use 50, 150 and 200 day and have a comment from a previous Weinstein/ TraderLion interview seared on my mind, basically that when a stock goes a certain percentage below the 50, he's out, but open minded about entering again if the chart signals. I've yet to watch the latest interview you posted in Wolf's stage analysis thread, thanks again for that.
Tein, you can put cash in Lyxor Smart Overnight Return - IE (LON:CSH2) Thats what I do.
Thanks for the tip Wolf, much appreciated, will investigate.
Hi TEIN, currently around 25% in cash, which is very unusual for me as I am normally fully invested. I get the feeling we might be in a bit of a false bounce at the moment and there is another pull back on the horizon.
I am happy to admit that I slightly naively panic sold out of a few positions on Monday where I was felt valuations had become a little frothy or I had concerns ( Avon Technologies (LON:AVON) , Bloomsbury Publishing (LON:BMY), Future (LON:FUTR) and Jet2 (LON:JET2). Of course most of these have risen from my sell price in the past few days but I still feel more confident having freed up some cash.
I do find it challenging to keep cash on the sidelines, I think it is part of my personality, I see things and get tempted to jump in. Even now I am in the process of building a new folio for Autumn stage 2's and a few other share ideas. A few of these have of course jumped up 5%+ in the past few days, so resisting the FOMO is tough but it is something I need to develop and want to stick to holding some cash through August as I think it could be a rough month on a macro level with new opportunities arising.
Thank you BenHazz for taking the time to respond and share your thoughts. I agree about the desire to protect cash but then feel it burning a hole in one's pocket! I also did some selling Friday and Monday, I'm not very proud of my approach which was 'act now, ask questions later', but I wanted to protect cash and take some profits.
As an aside I've been much more interested in watching stocks that have held up since last week than those that fell through their supports, and I posted a few in Wolf's mega 'Stage 2' thread earlier this week, I know you're familiar with that forum.