- Crescenzi: Claims Level Suggests End to Job Losses
- Schork Oil Outlook: Gas Bulls Pinning Hopes on Mother Nature
- Busch: The Debt-Interest Rate Paradox
- Busch: Markets Smell a Country Rat
- Schork Oil Outlook: Mission Impossible For The Bears?
- Losey: Asset Allocation At Retirement
- Farrell: Obama Hectored, Ignored and Restricted?
- Don't Dwell on Investment Mistakes; Move on, Like Buffett
- Hirschhorn: Greed...or Fear
- Schork Oil Outlook: Some New Hope For Nat Gas Bulls
MOST SHARED
- The Executive Job Search
- Chinese Overcapacity is Worsening, EU Chamber Warns
- Salvation Army's Kettles Now Credit Card-Ready
- US Mint to Suspend American Eagle Gold 1-Ounce Coins
- Oil Friday
- China Unveils Carbon Target Ahead of Copenhagen
- Dubai Debt Delay Rattles Stock, Bond Markets
- Black Friday: Bargain or Bust?
- Wal-Mart Price Pressure Hurts China Workers: Report
- 4 Thanksgiving Week Buys For Your Portfolio: Market Pros
- There's a 'Great Chance' For a Double-Dip Recession: Strategist
- Revenge of the Gangsta Nerds
- Will TCU See The "Flutie Effect?"
- Retail Earnings and Sales to Improve in Q4: Analyst
- Consumers Catching the Holiday Spirit
- It's Beginning To Look A Lot More Riskless
- Crescenzi: Claims Level Suggests End to Job Losses
- Hedge Funds Take Early Lead in Warren Buffett's 'Big Bet'
- Dubai Debt Delay Rattles Stock, Bond Markets
- Fannie Mae to Tighten Lending Standards: Report
- China Overcapacity Worsening, EU Chamber Warns
- Investing in Good Karma – and Making a Profit
- Black Friday to Avoid Red Ink; Greenback Gets the Blues
- Wal-Mart Price Pressure Hurts China Workers: Report
- Bankruptcies Jump, Hitting Highest Level in Four Years
- Steepest Black Friday Discounts, Revealed
- Where Do Pardoned Turkeys Go?
RSS FEED
CNBC Guest Blog
Text Size 
Michael Yoshikami
President & Chief Investment Strategist
YCMNET Advisors
Buy equities ... buy commodities ... buy xyx ... the headlines scream buy now or miss your opportunity of a lifetime. Okay great. It may well be that these assets have investment merit, but let's be real, in an environment like the one we're living in today, there is no substitute for having cash in your portfolio. Yes, your yields will be low but the return of your asset values (principle protection) can help your overall portfolio strategy especially when so many other assets are beat down.
What exactly is cash? Treasury bills, insured bank deposits, other government bonds and stable money market accounts qualify. You’re looking for assets that provide you with a high degree of probability your principal will stay intact.
Does this mean that you abandon equities, fixed income and commodities? For most people, the answer is no. It's about balance and being prudent as you invest. It's a probability game and for most investors, having cash in the portfolio helps soften the bumps as the markets gyrate.
Why does this make sense even if opportunities appear to invest in equities and bonds? It's simple math really. Making up losses is a big hill to climb. We all know how the formula works. If you invest $100 and lose 50%, you now have $50 remaining in that asset. To get back to breakeven, you need to capture an investment return of 100%. That's what you need to do to simply break even and make zero profit!
 |
That's a daunting return requirement under even the best of circumstances. Investing $100 in cash equivalent may provide low yields but at least you have your principal. There's something to be said for that when asset explosions are occurring on a daily basis.
It depends on your situation but having 20 or 30 percent of your portfolio in cash or short-term fixed income, even if you are a growth investor, is not such a bad idea. Some commodities, some fixed income, diversified global equities, all invested with a large portion of paranoia is probably a wise mix in today's uncertain environment.
Don't be lured by those that exclaim you simply MUST invest in a certain asset class or you will forever miss your opportunity for profit. Not true. Unless your time horizon is six months, you have plenty of time to be patient. Having cash in your portfolio will help you along the path towards a more stable, predictable investment strategy even in this crazy world we live in today.
___________________
Michael A. Yoshikami, Ph.D., CFP®, is Founder, President, and Chief Investment Strategist of YCMNET Advisors, Inc., a registered investment advisory firm (www.ycmnet.com). Michael oversees all investment and research activities of the firm and has over 20 years investment and financial planning experience. Michael is a respected lecturer speaking frequently on tactical asset allocation theory and appears regularly on CNBC and CNBC Asia. Michael can be reached directly at .
Data is a real-time snapshot *Data is delayed at least 15 minutes