Going to Cash

“Going to cash” can mean different things to different investors. Let’s cover a few scenarios.

A lot of investors are justifiably nervous. And as a result, many are thinking about how to go to cash following the quickest correction from all-time highs in the history of the stock market.

Selling some of your stocks and having a higher percentage of your portfolio in cash might end up being a fine idea, depending on what happens next in the markets. But as a general rule, it doesn’t pay to make sweeping portfolio changes, as there often are tax considerations and potential opportunity costs.

That doesn’t mean you have to sit on your hands and do nothing. In fact, a nasty stock correction can be a good opportunity to give your portfolio a critical look to see whether you should make any overdue adjustments.

“Ideally, you want to be allocated correctly going into a correction,” says Rachel Klinger, President of McCann Wealth Strategies, a Registered Investment Advisor based in State College, Pennsylvania. “You should have some portion of your portfolio invested in cash or equivalents precisely so you can take advantage of situations like these as they come up.”

“Furthermore,” she adds “with the yield curve as flat as it has been over the past year, cash or short-term T-bills make a lot of sense, at least relative to longer-dated bonds.”

To continue reading, please see How to Go to Cash.