I’ve been updating our asset allocation and just got every dollar invested (this doesn’t include cash set aside in our emergency fund).
It’s counter-intuitive and completely against my old way of thinking. You need cash so you’re ready to buy when things go on sale, right? It turns out that cash drag is one of the biggest factors in dragging down investment returns.
But the key to maximizing returns and minimizing losses is a balanced asset allocation. Not just that simple old 60/40 (60% in stocks, 40% in bonds), but a strategy that truly balances the risk of all possible environments.
Ray Dalio, who runs the largest hedge fund in the world, laid out a simple strategy based on his life’s work of maximizing returns while minimizing risk. It’s detailed in MONEY Master the Game, and summarized here.
Educate yourself and put your hard earned money to work.