Cash Reserves

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Sitting on a lot of cash at the moment, I know timing market isn’t the way to do it but there feels like so much uncertainty in the market right now is a reason to hold high cash reserves while taking small thoughtful positions. What do you think?

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Asked on December 29, 2020 6:10 pm
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Hi Brad,

Even if you are sitting on a pile of cash reserves and we don't believing in timing the market, we also don't believe in deploying all that cash at once. The more sensible approach in my opinion, is to average into the markets. This can be done in many different ways, but it is important to make investments that are inline with your risk tolerance.

There is nothing wrong with taking small positions, then averaging into those positions over a number of months. You may miss out on some upside, but it is also a less risky option. Perhaps set a schedule for averaging into positions so that you take the emotions out of any decision. Retail investing can be difficult as emotions are high and they are also why the average retail investor underperforms.

Mat

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Posted by Mathieu Litalien
Answered on December 30, 2020 4:59 am