Cash – Go for Effectiveness or Efficiency?

Before you ask anyone, we can make a good educated guess what their answer will be simply by verifying when they started their investment journey. Old stock junkies, were you a bit bemused like me recently when you see people getting quite animated when STI just dropped 2-3%? Don't talk about minus 50% 1997 and 2008 severe hair-cuts like during our Basic Military Training time. Since 2009, we have not had a plain vanilla 10% correction in our STI yet!? End 2011 US fiscal cliff scare was the closest to a 10% correction. Missed by a bit. So those who started during and after 2009 had never experienced a proper 20% bear market. Now how cool is that?

What we say and do are frequently shaped by what we think we know and our past experiences. One group will go for effectiveness and let cash rot in the bank. They have learnt the hard way that when opportunity knocks and you have cash to welcome it in, its mighty powerful!!! Winning the war is more important than aiming to win every battle. Another group will agonise over efficiencies - like if STI zooms up 10% and we are 30% in cash, it will be a big drag to our benchmarking with STI... How to have bragging rights like that? Or if our income portfolio is generating 6% yield, having 30% in cash is simply too "expensive" in opportunity costs... That's no good if I want to hit my increased passive income goals. You may want to try this exercise with your fellow investing friends. First ask when they started their investing journey. Then survey them what's their opinion on having cash in their portfolio. Have fun!

Singapore Man of Leisure (welcome to my blog; just google it!)

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