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Why This Investor Holds Cash for Market Downturns

By Brian Withers and Tim Beyers - Feb 2, 2021 at 6:30AM

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It's a simple but powerful reason.

Ask two investors how they think about holding cash and it's likely you'll get two different answers. Some investors prefer to stay fully invested at all times to take maximum advantage of the market. Others like to keep cash handy as "dry powder" to buy stocks at opportune times. Motley Fool analyst Tim Beyers answers a listener question on the Jan. 27 "Mindset" show from Motley Fool Live as to why he always keeps cash handy for investing.


Tim Beyers: [Here's the next listener question] Have you analyzed how much return you may have lost by not being fully invested versus keeping cash on the side for downturns that are very infrequent?

I have not done that math. The reason I don't do that math, GoBucksOhio, is because from a mindset perspective, I'm a better investor when I never have to make two decisions. Meaning that I never have to make a sell decision in order to make a buy decision. I'm a better investor when I don't have to make a sell decision in order to make a buy decision.

I just have the cash and I could make the buy decision. It takes my anxiety out of the equation. I know that for me, from a mindset perspective, it's worth it. Whatever I paid in terms of not being invested fully, it is worth it to me because my mindset is at much closer to peak performance by having that cash position, if that makes sense.

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