Question: “You wish to hold a portion of your portfolio in cash ...”
An investor may want to hold a portion of the investment amount in cash to take advantage of future buying opportunities. This is often referred to as being “not fully invested”.
The general guideline for creating a cash position is the larger the size of a cash position, the more aggressive is the investment strategy. Specifically:
A cash position of 10% to 20% of the total investment is considered to be large.
A cash position of 20% or higher is considered to be speculative.
Cash positions larger than 20% should have a plan to re-invest within a year.