Liquidity: How Much Do You Need?

How much of a liquid balance should investment portfolios contain? That question crops up frequently in financial planning as investors try to determine their overall portfolio. The first part of the question, of course, is: “What is liquidity?” Liquidity refers to the time required—and the cost incurred—to convert assets into cash. The more quickly and…

 

The Mutual Fund Cash Dilemma

This article originally appeared in the May 2014 issue of the AAII Journal. After any major stock market rally, investors should examine each of their mutual funds to assess whether the manager must remain fully invested or has the ability to raise cash in the absence of acceptable opportunities. History shows that stocks can remain at high valuations…