Following the advice of the Oracle of Omaha to be “greedy when others are fearful and fearful when others are greedy,” one would be well-served to keep a large cash position on hand with the intent on investing selectively as market conditions change in the near to medium-term.
With many analysts and economists predicting a significant period of low returns at best, and a severe market correction at worst, piling up cash with the intention of waiting to deploy it may be the best way to go for investors with a long investment time horizon.
To put Mr. Buffett’s cash position in perspective, it is estimated that he has nearly $100 billion in cash available to be used right now, with a market capitalization of less than $450 billion, culminating in a cash position of approximately 20% in a time when many other asset managers are rushing to invest cash in equities instead of earning near-nil returns on balances sitting in investment accounts in the hopes better opportunities will arise.
Following Mr. Buffett’s advice may be the difficult thing to do, however, accumulating a 20% cash position as a rule of thumb intoday’s environment certainly seems like the prudent thing to do.
Invest Wisely, my friends.