It seems to me that the author's argument rests on the assumptions that there will be a market crash and that stock prices at that time will be significantly lower than today. However, this is a form of market timing (i.e. don't buy more stocks now, wait till they are cheaper and you can get them at a bargain price...). Like all forms of market timing, it's not clear that it will work.
My criteria for holding cash/bonds are 1. to meet expenses in the next 5-7 years and 2. avoiding a drawdown I would be unfortable with if the stock part of my portolio lost say 50%.
But holding cash with the idea of buying stocks 'when there's blood on the street' might be a bad idea and one might end up paying an opportunity cost, since nobody knows if stocks will be significantly cheaper that today at a future date.
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It seems to me that the author's argument rests on the assumptions that there will be a market crash and that stock prices at that time will be significantly lower than today. However, this is a form of market timing (i.e. don't buy more stocks now, wait till they are cheaper and you can get them at a bargain price...). Like all forms of market timing, it's not clear that it will work. My criteria for holding cash/bonds are 1. to meet expenses in the next 5-7 years and 2. avoiding a drawdown I would be unfortable with if the stock part of my portolio lost say 50%. But holding cash with the idea of buying stocks 'when there's blood on the street' might be a bad idea and one might end up paying an opportunity cost, since nobody knows if stocks will be significantly cheaper that today at a future date.
Post: When Cash Is King
Link to comment from November 6, 2021