How to put cash to work in a market downdraft

“If you enjoy following markets and want to take advantage of future opportunities, consider keeping a small portion of your overall portfolio in cash. I choose 10%, though your willingness to patiently wait in low-yielding cash may justify a different percentage. Keep it separate from an emergency fund meant to cover bills should you lose your job or suffer an unexpected illness. Make a plan ahead of time for how to deploy the cash if stocks fall, so that you won’t get caught up in the heat of the moment. Mine is to put one-third of my cash hoard into my usual array of stock funds if prices fall 20% from a recent high, another third if they fall 30%, and the remainder if stocks fall 50%—which happens a few times a century, judging from history. Another option is to invest in an actively managed mutual fund that keeps a significant amount of its assets in cash. Such funds can take advantage when opportunity strikes and fully invested competitors are caught flat-footed.” (VIEW LINK)


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