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-   -   Why do we need cash? (http://archives2.twoplustwo.com/showthread.php?t=390432)

Soh 12-03-2005 06:02 AM

Why do we need cash?
 
I'm new to this topic, so maybe somone asked this already...

Anyway, why do people recommend to have like 5% cash in your mutual fund portfolio? I'm looking at this one particular model, and it says 75% US stocks, 20% international, and 5% cash, as an optimal aggressive plan.

Thanks

Soh

Sniper 12-03-2005 10:41 AM

Re: Why do we need cash?
 
You might hold interest earning cash, to reduce volatility.

DesertCat 12-03-2005 12:27 PM

Re: Why do we need cash?
 
It may also be for emergency needs. Say you lose your job, you don't want to be forced to sell stocks or bonds (possibly when they are at their lows) to pay your rent.

Similarly if you are in retirement and will be taking regular cash distributions from your portfolio for living expenses. You would keep some cash ready, so you aren't forced to sell at the wrong time.

NobodysFreak 12-06-2005 02:58 AM

Re: Why do we need cash?
 
you can't use a debit card or stock to buy drugs and prostitutes.

wonderwes 12-06-2005 10:28 AM

Re: Why do we need cash?
 
When the 2 big hurricanes tore through the gulf coast, a majority of credit card machines, ATM's and banks went offline. No matter where in life, cash will always be accepted.

r3vbr 12-06-2005 11:43 PM

Re: Why do we need cash?
 
[ QUOTE ]
When the 2 big hurricanes tore through the gulf coast, a majority of credit card machines, ATM's and banks went offline. No matter where in life, cash will always be accepted.

[/ QUOTE ]

That's not correct. When governments fall, cash becomes worthless. Then it's good to have some of these: http://en.wikipedia.org/wiki/Krugerrand

12-07-2005 01:32 AM

Re: Why do we need cash?
 
In mutual funds, I heard that its good to have extra cash for the managers to use at their discretion, so they don't always have to sell one stock to buy another.

Soh 12-08-2005 09:32 AM

Re: Why do we need cash?
 
My cash inside of my portfolio is earning some interest, but I'm sure there's better safe investment that earns more interest, like some bonds.

Soh

Soh 12-08-2005 09:33 AM

Re: Why do we need cash?
 
I was talking about the cash within MY portfolio, not within some mutual funds.

Soh

Soh 12-08-2005 09:36 AM

Re: Why do we need cash?
 
The thing is, it'll take some time to take the cash in my portfolio out anyway.

Plus, I'm not planning to use this cash for some emergency. For some emergency cash, safe is a better place, IMO.

Soh


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