Tue Aug 20 2024, by Tyler Gardner

Why Cash is King

Here is why cash is king, and you should always have about 10% of your assets in cash, regardless of how much money you have or where the markets are.

I'm Tyler, a former financial advisor and portfolio manager, and now I create financial content for free so that you don't have to pay for it.

Key Reasons to Hold Cash

• Market Crash Opportunities: When you have cash and the market crashes 10 to 20%, you can just buy more stocks on sale instead of having to sell other assets to do so. This is why Berkshire Hathaway continues to excel year after year—they have a substantial amount of cash.
• Emergency Fund: Keeping cash allows you to have an emergency fund covering three to six months of living expenses. This means if, and when, the market crashes, you don’t have to sell assets at a discount just to afford rent.
• Mitigating Sequence of Returns Risk: Especially once you're retired, having cash can help you mitigate the risk of sequence of returns. For instance, if you planned on withdrawing 4 to 6% from your portfolio for living expenses but the market crashes in your first year of retirement, without cash, your plan may fall apart. Cash allows you not to liquidate your assets to cover daily expenses.

Again, if any of this information is helpful, like and follow, and I'll keep trying to get you one step closer to financial stability.

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