Portfolio Cash: From 15% to 90% Waiting for the Drop

20% Liquidity: The Cushion Awaiting a Correction That Never Arrives

"When the tide goes out, I'll be ready," summarizes a forum user. The strategy has been maintained for years: keeping part of the portfolio in cash, waiting for a major downturn. The starting point, according to the thread peine, is an overbought market, companies posting good results yet not rising, and several well-known investors reducing positions. Based on this diagnosis, the question that divides opinion is: How much liquidity should be held? Answers range from 15% to 90% of assets.

What Percentage of Liquidity is Advisable to Hold in a Portfolio

The range is wide. Some set their usual buffer between 15% and 20% and adjust with short rotations when the tide goes out. Others raise the figure to 35% in cash and wait for it to drop to 15-20% before injecting capital again. And there are those who settle for a 50/50 split, acknowledging that holding cash has cost a lot of lost profits while the market was rising.

Each figure answers a different question. Some protect against a correction they believe is imminent. Others accumulate for a real estate opportunity. The common ground: nobody knows when the time to act will come.

Inflation vs. Liquidity: The Dilemma No One Solves

Here lies the most recurring contradiction. If inflation rises, idle money loses purchasing power; but if the market is overvalued, entering now means buying expensively. It's argued that these are separate issues: protecting against inflation requires real assets—oil, commodities, gold, companies with the ability to raise prices without losing customers—while overvaluation advises waiting for corrections to buy those same companies cheaper.

The practical result is a limbo. Neither fully invested nor fully sheltered. And without a definitive answer.

Tech Stock Declines in Just Four Weeks

When the market proves the cautious right, it does so suddenly. A look at just one month shows this list: Plug Power, -37%; Twist Bioscience, Teladoc, and Airbnb, -20% each; Editas Medicine, -23%; Palantir, -16%; Spotify, -16%; Beyond Meat, -14%; Taiwan Semiconductor, NIO, and Netflix, -10%. It's not a general correction, but a selective punishment of the stocks that had risen the most.

Stimulus Withdrawal and Central Bank Timetables

The most cited argument for expecting a downturn isn't technical, it's monetary. A specific timetable is pointed to: the People's Bank of China began reducing stimulus a month ago, the Bank of Canada joined last week, and there are rumors the Bank of England will cut bond purchases in the coming weeks. If the ECB trinc suit and the Federal Reserve has weeks or a couple of months to do the same, the circulating calculation is that the stock market will fall by a minimum of 20% to 30%.

Weighing against this is an uncomfortable detail: some argue that markets have become dependent on these stimulus measures.

Buying the Dip: The Problem Isn't Analysis, It's Nerve

There's an uncomfortable consensus: knowing how to value a stock is the easy part. Executing when everything is crashing is the hard part. Those who saw many opportunities during the 2020 crash and backed down admit it plainly: I'd have much more money now. The key organ isn't the brain, another voice maintains, but the stomach.

At the opposite extreme, an investor with 17 years of experience liquidated 90% of their portfolio in a few days trinc the bankruptcy of a major Chinese real estate company and the feeling that "nothing is working as it should."

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The goal some set is to build a portfolio of 600,000 euros that, with an average 4% return, yields 2,000 euros monthly in dividends. At that rate, every year money waits in the bank is a year it doesn't compound. Liquidity provides peace of mind. It also has a price.