In August of this year, BlackRock did a survey of 4,000 Americans. One of the most interesting things they discovered was surprising to me. According to their survey:
“As was true in our 2013 survey, “cash remains king” with almost two-thirds (63%) of all savings and investments held in cash?and most of that in traditional checking and savings accounts (51%).”
There are certainly good reasons to hold cash, like a financial safety net for example. We’ve blogged about emergency funds and how necessary they are previously (https://mullooly.net/how-much-money-should-be-in-my-emergency-fund/6436). Having cash in the bank makes people feel safe and helps them make more rational decisions.
There’s room for cash in any portfolio, but having too much cash brings opportunity cost into the equation. While many investors are still risk averse after experiencing years like 2008, sometimes the biggest risk for long term investors is not taking any at all.
Emergency funds, allocations to cash, and other portfolio based questions are obviously ones to talk about with your investment advisor. I wanted to share those numbers from Blackrock though because I thought they were pretty crazy.
Source:
http://www.blackrock.com/investing/insights/investor-pulse/overallocation-to-cash