If I recall, back in the 2000s when I began reading and trying to understand investing as I finished college and began my working career, most things I read discussed asset allocation as the mix of stocks, bonds, and cash.
The Bogleheads wiki still states "Asset allocation means dividing an investment portfolio among different asset classes. Typically these are stocks, bonds, and cash."
However, the "Asking Portfolio Questions" sticky in the Personal Investments section of this forum states "Desired Asset allocation: xx% stocks / xx% bonds."
When discussing asset allocation, most in the forum, including myself, talk about the mix between stocks and bonds or stocks and fixed income. Some probably have cash as part of the bonds or fixed income portion. In defense, cash is indeed fixed income.
I have no metrics or other examples to back it up, but it just feels like we've gotten away from recommending cash or other riskless assets in a portfolio, outside of an emergency fund.
Considering the rough run that bond funds have had over the last couple years, particularly in 2022, I have been thinking about this.
I have held an 80/20 three-fund portfolio for years. I've always held about 5-6% in savings, I Bonds, or money market mutual funds , so in reality it's been an 80/15/5 portfolio. The 5-6% in cash happens to be about 9 months of expenses.
Do cash or other riskless assets have a place in a portfolio? Does it only come into play once there's a significant portion of fixed income?
If not, should one hold cash or other riskless assets outside the portfolio, such as an emergency fund or cash buffer
On one extreme, we have people like livesoft, who hold almost no cash and simply sell equity index funds when cash is needed.
On the other, we have KlangFool, who hold three years of expenses in cash.
The Bogleheads wiki still states "Asset allocation means dividing an investment portfolio among different asset classes. Typically these are stocks, bonds, and cash."
However, the "Asking Portfolio Questions" sticky in the Personal Investments section of this forum states "Desired Asset allocation: xx% stocks / xx% bonds."
When discussing asset allocation, most in the forum, including myself, talk about the mix between stocks and bonds or stocks and fixed income. Some probably have cash as part of the bonds or fixed income portion. In defense, cash is indeed fixed income.
I have no metrics or other examples to back it up, but it just feels like we've gotten away from recommending cash or other riskless assets in a portfolio, outside of an emergency fund.
Considering the rough run that bond funds have had over the last couple years, particularly in 2022, I have been thinking about this.
I have held an 80/20 three-fund portfolio for years. I've always held about 5-6% in savings, I Bonds, or money market mutual funds , so in reality it's been an 80/15/5 portfolio. The 5-6% in cash happens to be about 9 months of expenses.
Do cash or other riskless assets have a place in a portfolio? Does it only come into play once there's a significant portion of fixed income?
If not, should one hold cash or other riskless assets outside the portfolio, such as an emergency fund or cash buffer
On one extreme, we have people like livesoft, who hold almost no cash and simply sell equity index funds when cash is needed.
On the other, we have KlangFool, who hold three years of expenses in cash.
Statistics: Posted by Triple digit golfer — Mon Apr 29, 2024 7:52 am — Replies 0 — Views 16