The bottom line is this: Cash, in modest increments, has a role in any portfolio. But unless you are Warren Buffett, you should limit it to 2 or 3 percent.
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I personally have said many times I'd be a hundred percent in equities. That fits my risk profile and my views of the world, though obviously it's not appropriate for everyone. Most investors need a more diversified portfolio.
Many follow a rule of thumb - no more than 5% in one stock. But that's not the entrepreneurial road to riches.
You've always got to think about having some fixed income in your portfolio as well as equities.
Portfolio theory, as used by most financial planners, recommends that you diversify with a balance of stocks and bonds and cash that's suitable to your risk tolerance.
When markets are rallying, cash in the portfolio is a drag on performance, returning about zero.
You want less of the annoying nonsense that interferes with your portfolios and more of the significant data that allow you to become a less distracted, more purposeful investor.
There's 4,000-plus stocks out there, and sometimes it gets a little confusing. And we like them to start with the portfolio grader, but if they'd like to see how I use the system and pick stocks - we offer that as well.
I would never be 100 percent in stocks or 100 percent in bonds or cash.
You'll get the biggest bang for each buck by paying off the highest interest rate debt in your portfolio first, while making minimum payments on the remainder. It's called the avalanche method, and it gets you out of debt cheapest and fastest.
Both cheap value stocks and more glamorous growth stocks can work well in a portfolio - if done right.
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