Cash in on Opportunities

As I mentioned in yesterday's post, many people are holding way more cash in their portfolios than they used to, before last year's stock market crash. The average cash holding is now around 19% of the typical portfolio. While cash is a good asset to hold for liquidity and safety, it is not a good asset for appreciation and inflation risk. Cash should be used for opportunities that present themselves in the markets. Yesterday, the Dow Jones index dropped almost 190 points. Some people are worried that the economic crisis is far from over. Others believe that the markets had advanced too quickly in the past 3 months and it was a time to sell and book profits. If you had cash on the sidelines yesterday, you could have taken advantage of some buying opportunities for the future. To be sure, you should keep funds needed for short term needs like home, car, and college tuition expenses in safe, liquid investments, like CD's and money markets. But for the longer term, stocks, bonds, and alternative investments will bring higher yields and a greater total return. Want a guaranteed return? Pay off some credit card debt!