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Don't invest all your cash… keep some for rainy stock market days

by , 11 July 2014

Keeping your money in cash may be one of the lowest risk things to do with it. But chances are your money isn't going to pay you much of a return.

Investing your cash across a spectrum of investment can be a wise choice. But you should always keep some spare.

Spare cash means you're in a position to jump on opportunities as they arise…

The importance of holding cash

It makes sound financial sense to always have a safety net of cash. And before you even think about investing, you should have an emergency fund at your disposal.

You never know what could be around the corner, Phil Oakley in Money Week explains. Maybe your car will need some work done or your house needs urgent repairs.

So to prepare yourself for this and any other unexpected events, aim to hold enough money that would last you about six months based on your normal monthly expenditure.

Cash and investing

Once you decide how much money you’re going to invest in the markets, make sure you ear mark a portion of that to hold in cash.

If can be beneficial to hold some cash as part of your investment strategy.

Not only will holding some cash spread your risks as part of a diversified portfolio, it should help you panic less if the markets take a few knocks. In other words, not all of your money is at risk.

Cash in your portfolio means you can also take advantage of assets that drop in price. If you have all your money in the markets, you can’t take advantage of opportunities like this. You either sell your assets at a lower price or hold on until they recover.

So there you have it, why you shouldn’t invest all your cash and keep some for stock market rainy days.

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Don't invest all your cash… keep some for rainy stock market days
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