In view of the current scenario, what percentage of my portfolio should I keep in cash while waiting for the next opportunity?
- Vinod Kumar
It entirely depends on your belief. If you believe that the next opportunity is around the corner, then here comes a spate of questions. These include: what will be the kind of the decline? Which factors will make it a great opportunity? Will it be a 10 per cent decline or a 25 per cent decline? And what kind of decline are you waiting for?
If you can answer these questions and strongly believe that it will happen, then you may have 20 per cent cash and wait for that opportunity. This is because just in case your hunch is wrong, then 80 per cent of your investments will still be at work.
I agree with you that the market gives you surprises. When everybody was thinking that the market would crumble, it did not. But many times, corrections happen in terms of time. It is not necessarily in terms of real correction. The market may not go down but if for the next one and a half year or so, the market doesn't go up, then it means that it has corrected. Because in a sense, the value of money today is not going to be the value of money one and a half years from today! So, there could be a time correction. That is also the correction of some kind and it translates into opportunity loss because the money could have been put to work elsewhere and it could have earned something. So, I would say that don't have anything more than 20-25 per cent today unless you have some special reasons to think about it.