Cash is king now?

Ray Dalio, the founder of Bridgewater, once said that cash is trash. Please give me that trash. I don’t mind. 😊 He meant that cash devaluates in the long term due to inflation, so it should be invested to grow.

Since the stock market dropped so drastically lately, many experts on TV advocated cash as king now and fiercely debated when will be the market bottom. If you can know fore sure when it is, you would hold on to your cash and deploy it to buy the dip at the bottom.  Some might rush to sell their investments to raise cash. Some want to buy later when it goes further down, while some just want to preserve the value. This is a critical decision point here.

There is this thing called technical analysis. The experts usually would bring out the past several decades statistics of the market and pick out the most relevant data point to support their predication. For example, is there a soft landing for all the recent interest hikes by the US Federal Reserve? Many argued that it is unlikely because the history demonstrated so. Of course, they would not use absolute wording but rather leave some room for errors. I am still not convinced by all these fancy tools to predict the short-term market change and make buy or sell decision on that. I saw so many investment pros made wrong predictions and had to admit it later on national TV. It is a fool’s game.

One thing I know for sure is that it is very risky to make big move on the chunk of one’s portfolio to time the market. For example, sell a big part of investment if one thinks the market crash is imminent. It is similar to gambling. If one gets it right one time, he might keep doing it. Then, he might probably lose later because he does it to often with his growing confidence.

Probably cost dollar average is suitable strategy for most people, we mere mortals. That means to buy securities similar and small amounts regularly. This is to spread the risks. If one suddenly encounters a windfall of cash, it might be advisable to divide the whole amount into several portions and deploy them in the next 3 to 6 months. This is a humble acceptance that it is impossible to time the market for majority of the people. Therefore, no need to kick yourself if you miss the bottom to buy or the peak to sell. That is a dream anyway.