Cash Position Weight

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Indicator Description

Funds or ETFs that have over 40% of their value invested in low-risk instruments or cash equivalents typically attract conservative investors.

Cash Percentage

 = 

% of Cash

in the fund

Percentage of fund asset invested in cash equivalents or risk-free instruments. About 40% of all global funds carry cash on their balance sheet.

Cash Position Weight In A Nutshell

When looking into funds or your own portfolio, cash is important because it will allow you to purchase more assets when the prices fall, but it will keep you safe from an overall market downturn. Many people look at cash and think that’s not a position, but it certainly is and can be used to your advantage in your investing style.

Typically in funds or within your own portfolio, there are three main categories, which include equities, bonds, or cash. Many people fail to realize cash is a position and it is important it is utilized properly. When the market is roaring, you may want to see minimal cash because funds should be invested.

Closer Look at Cash Position Weight

When looking into a mutual fund, you may want to see little cash because the fund is supposed to be going towards a goal for the annual return. The diversification within the fund should be enough to eliminate specific risks, meaning most of the cash should be put to work. On the other hand, if you are in a bond fund, it may be more acceptable to have a little more cash on hand as holding cash is essentially risk free.

Negatives to having cash in a fund or your portfolio is that the money is not growing. There are options such as money market accounts, but that will earn minimal interest and is not an investment for the long term, but rather capital preservation. Also, you have to look at the inflation rate, because if your money is not earning over 2%, you run the risk of losing money due to inflation. There are many factors involved with cash and each situation has its pros and cons, so be sure to understand what each scenario is telling you.

Rounding the discussion, you typically want to see most, if not all the funds available being invested because the missed opportunities are greater. If another 2008 happens, then it is completely understandable that cash positions are larger because it will limit the negative affects.  If you have questions, reach out to the companies that produce your products you might invest in and ask why they have cash allocations as they do. Be sure to have a full understanding before moving into new positions, and if you still feel nervous, just forgo that particular product and check another one out. Cash position weighting is just as important as any other factor in your portfolio or the funds you are investing in.

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Banks - Regional
Banks - Regional Theme
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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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