- Holding cash may be considered an opportunity cost, but its also a call option with no expiration date.
- The yield you can expect from bonds is 1.5% and the yield from stocks is 2% or 4% when earnings are included.
- Holding cash will give you the liquidity to load up the truck when opportunities come knocking.
We’re often taught that action is the way to solve all issues; the more you work the more you have, and as good economists, we have to use all available resources. But that isn’t always the best way to approach investing because all that action may sometimes be just like rowing toward a cliff.
The other option is to do nothing,—or even better, to do something completely separate from investing, like playing with your kids, traveling, etc.—and sticking to cash with a significant part of your portfolio for a while. More →