Over the past year holding a cash position in your portfolio has been a shrewd and profitable move as bonds and equities have struggled. As you will know my own £50k portfolio has had an elevated cash position for much of this year, typically between 5-7%.
Actively deciding to hold cash in a portfolio, whether it be to preserve capital or being ready to deploy back into the market, is one thing however holding cash over the longer term obviously raises its own problems. These include the threat of inflation erosion as well as the opportunity cost in terms of lost returns elsewhere. But obviously once the short-term benefit of holding cash passes it's sensible to invest the money into assets once again for the long term growth opportunities. However most investors are unaware that some of the funds within their portfolio may be holding significant cash positions.
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