Friday, May 6, 2011

Should a person keep holding cash in a money market yielding only 0.25% ?

Here's a non-challange for users of EzBacktest, create a portfolio hoding SHY at 90%, and what-ever else at 10%. Simulate that for about 120 months (the results will probably be shorter). You are likely to see something that's not very rewarding, but definitely not negative or yielding 0.25%. Something is better than nothing, and the banks are giving us precisely nothing these days while inflation and commodities are chewing down on our cash holdings.

Still, one wants to have some peace of mind with a certain amount of funds that can't be worth less than what he originally had. And in numbers, he might still have the same amount of dollars... perhaps only in numbers.

What would be the maximum amount one aught to hold in hard currencies without expecting any returns?

Cheers!

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