In an upward climbing market, being close to or fully invested is a good thing to do, but what happens if markets go down? Sometimes they go down a little bit (correction) sometimes they fall 10% or more. When the markets fall more than 10% people will begin to sell their investments, given billions of dollars are it ETFs, Index funds, Mutual funds, this will mean the fund needs to sell its holdings to pay the redemptions. What should you do? Larry Sarbit writing an article titled The Liquidity Trap says similar to Warren Buffet- cash is to business as oxygen is to people, never thought about when it is present, the only thing in mind when it is absent.

If you buy ETFs or many funds, if they carry less than 5% cash holdings, if and when the markets go down, they will not be able to take advantage of buying opportunities for they will worry about redemptions and funding the fund. If you believe the market is overvalued and the street tends to agree. then having a cash portion is a great idea.

Linking to dividend paying stocks, some of the money you invest is there for many reasons. Sometimes you improve your residence, buy something, reinvest, there are many things you do with money. If the timelines are perfect then there is little overlap however most times the timelines are not perfect, so you will sell when you need to pay these bills. Ideally, the money was invested for the long term and you made money and the market is still favorable to your outcome. Just remember, sometimes cash is king and be prepared. If you have dividend stocks you have a choice with the dividend  – reinvest or take in cash to have patience for the right opportunity.

There are more questions than answers, till the next time – to raising questions.