Warren Buffett has some interesting things to say about this: https://20somethingfinance.com/warren-buffett-is-moving-100-... and http://www.barrons.com/articles/buffett-bonds-terrible-in-co... for example.
https://portfoliocharts.com/2017/05/12/understanding-cash-wi...
Harry's 25% cash isn't dollar bills, it's treasury bills, which have held up to inflation.
>Harry's 25% cash isn't dollar bills, it's treasury bills, which have held up to inflation.
Short-term ones haven't for last ~10 years, especially if it's a taxable account.
> I hear some version of this argument all the time: The opportunity cost for holding cash is too high. It earns virtually nothing, and you’re guaranteed to lose money to inflation. Just get over your fear and buy stocks!
It would be much more helpful to say something like "having an investment of stable value can decrease the volatility of the returns as you balance in and out during the market ups and downs, and improving the risk-adjusted returns, which back-testing can demonstrate". (I don't know if that's what it said, but that's an example of contributing the insights back to the discussion.)
And if the article really did provide insight, wouldn't it be easy to produce a paragraph like the above?
> Harry's 25% cash isn't dollar bills, it's treasury bills, which have held up to inflation.
OP seemed to be under the misconception that cash meant dollar bills under the mattress. The article addresses this in the section beginning "To explain, I think it helps to start with the definition of cash..."
OP seemed to be under the misconception that cash responds poorly to inflation, which the article also addresses.
1) What else is the article adding? The fact that it (historically) yields something above inflation was enough to refute the OP's implied claim about negative real returns.
2) That wouldn't address the OP's point that they still have a low RoR for a long-term portfolio.
3) As in my comment it wouldn't refute that T-bills haven't kept up with inflation recently.
If the article's point is about how balancing into/out of a stable investment can improve portfolio return, then that would warrant a summary in your comment.
Sorry if my comments come off as mean. I'm trying to convey why a giant article might not be helpful to resolving the disagreement.
> Sorry if my comments come off as mean.
You're not coming off as mean. I can tell you're genuinely trying to improve the discussion here, and you reminded me that when I'm replying to someone, the audience is wider than just that person. Thanks.