Cash is a drug for investors, redux
- August 15th, 2013
Good ideas never die. Here I from a post earlier this year:
I think that “cash is a drug” for most investors. Easy to start, difficult to kick. Always a reason to NOT get back in.
Today in the Wall Street Journal, Corrie Driebusch talks about the cash conundrum in conjunction with the recent bond rout.
It’s double trouble for financial advisers when clients insist on the safety of cash, as some did when the bond market became roiled.
One problem: Cash is sure to lose value to inflation. The other: Once an investor moves into cash, it can be hard to persuade them to put the money back in the markets.
My conclusion from the earlier post still stands:
Market timing is a gateway to cash addiction. One need only look at fund return statistics to see that individual investors have a horrible tendency to buy high and sell low. Have a strategic (or even tactical) asset allocation and stick to it. Let the “professionals” wield cash in an option-like fashion. You have better things to do with your time.
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- Thursday links: understanding Wall Street
- 6 Essential Principles from Pragmatic Capitalism by Cullen Roche
- Wednesday links: the multiplier effect
- Tuesday links: knowledge alone
- To bond ETF or not: an excerpt from Rational Expectations by William Bernstein
- Monday links: excessive valuations
- Sunday links: paralyzed with fear
- Top clicks this week on Abnormal Returns
- Saturday links: ripe for disruption
- Friday links: investor class attentions