Are Your Finances Safe? Take The Financial Retirement Threat Assessment Survey

As we get closer to retirement, the more we need to worry about our finances and the security of our retirement savings.  7 questions designed to show you what threats exist and what you can do to minimize future loss.

If you don’t know the threats to your savings, you can’t take action and you can’t protect yourself. Once you know, then you can take action.

Click on the image below to start your survey.

Here’s Where the Next Crisis Starts – You Think The Stock Market Is Safe!? You Better Think Again!

The case for a pending financial collapse is well grounded. Financial crises occur on a regular basis including 1987, 1994, 1998, 2000, 2007-08. That averages out to about once every five years for the past thirty years. There has not been a financial crisis for ten years so the world is overdue. It’s also the case that each crisis is bigger than the one before and requires more intervention by the central banks.

The reason has to do with the system scale. In complex dynamic systems such as capital markets, risk is an exponential function of system scale. Increasing market scale correlates with exponentially larger market collapses.

This means a market panic far larger than the Panic of 2008.

Today, systemic risk is more dangerous than ever because the entire system is larger than before. Due to central bank intervention, total global debt has increased by about $150 trillion over the past 15 years. Too-big-to-fail banks are bigger than ever, have a larger percentage of the total assets of the banking system and have much larger derivatives books.

Each credit and liquidity crisis starts out differently and ends up the same. Each crisis begins with distress in a particular over borrowed sector and then spreads from sector to sector until the whole world is screaming, “I want my money back!”

First, one asset class has a surprise drop. The leveraged investors sell the sinking asset, but soon the asset is unwanted by anyone. Margin calls roll in. Investors then sell good assets to raise cash to meet the margin calls. This spreads the panic to banks and dealers who were not originally involved with the weak asset.

Soon the contagion spreads to all banks and assets, as everyone wants their money back all at once. Banks begin to fail, panic spreads and finally central banks step in to separate winners and losers and re-liquefy the system for the benefit of the winners.

Typically, small investors (and some bankrupt banks) get hurt the worst while the big banks get bailed out and live to fight another day.

That much panics have in common. What varies in financial panics is not how they end but how they begin. The 1987 crash started with computerized trading. The 1994 panic began in Mexico. The 1997–98 panic started in Asian emerging markets but soon spread to Russia and the big banks. The 2000 crash began with dot-coms. The 2008 panic was triggered by defaults in subprime mortgages.

The problem is that regulators are like generals fighting the last war. In 2008, the global financial crisis started in the U.S. mortgage market and spread quickly to the overleveraged banking sector.

Since then, mortgage lending standards have been tightened considerably and bank capital requirements have been raised steeply. Banks and mortgage lenders may be safer today, but the system is not. Risk has simply shifted.

What will trigger the next panic?

Prominent economist Carmen Reinhart says the place to watch is U.S. high-yield debt, aka “junk bonds.”

I’ve also raised the same argument. We’re facing a devastating wave of junk bond defaults. The next financial collapse will quite possibly come from junk bonds.

Let’s unpack this…

Since the great financial crisis, extremely low interest rates allowed the total number of highly speculative corporate bonds, or “junk bonds,” to rise about 60% — a record high. Many businesses became extremely leveraged as a result. Estimates put the total amount of junk bonds outstanding at about $3.7 trillion.

The danger is that when the next downturn comes, many corporations will be unable to service their debt. Defaults will spread throughout the system like a deadly contagion, and the damage will be enormous.

This is from a report by Mariarosa Verde, Moody’s senior credit officer:

This extended period of benign credit conditions has helped many weak, highly leveraged companies to avoid default… A number of very weak issuers are living on borrowed time while benign conditions last… These companies are poised to default when credit conditions eventually become more difficult… The record number of highly leveraged companies has set the stage for a particularly large wave of defaults when the next period of broad economic stress eventually arrives.

If default rates are only 10% — a conservative assumption — this corporate debt fiasco will be at least six times larger than the subprime losses in 2007-08.

Many investors will be caught completely unprepared. Once the tsunami hits, no one will be spared. The stock market is going to collapse in the face of rising credit losses and tightening credit conditions.

But corporate debt is not the only dagger hanging over the economy. Credit conditions have already begun to affect the real economy. Student loan losses are also skyrocketing. Losses are also soaring on subprime auto loans, which has put a lid on new car sales. As these losses ripple through the economy, mortgages and credit cards will be the next to feel the pinch.

Have we already seen the beginning of the next crisis? No one knows for sure, but the time to prepare is now. Once the market falls apart, it’ll be too late to act.

*** That’s why the time to buy gold is now, while it’s cheap. When you need it most, once the crisis hits, it’ll cost a fortune. ***

Both the panics of 1998 and 2008 began over a year before they reached the level of an acute global liquidity crisis.

Investors has ample time to reduce risky positions, increase cash and gold allocations and move to the sidelines until the crisis abated. At that point there were bargains galore for those with cash.

An investor with cash in 2008 could have preserved wealth during the crisis and nearly quadrupled his money since then by buying the Dow Jones index at 6,550 (even with the recent turmoil, today it’s still around 23,600).

Relatively few investors did this. Instead they suffered from “fear of missing out” as markets rose until the panic began. They persisted in the mistaken belief that they could “get out in time” if markets reversed, not realizing that reversals happen much faster than rallies. They held onto losing positions hoping they would “come back” (they did after 10 years) and so on.

Simple behavioral biases stand in the way of doing the right thing almost every time.

For now, it’s not clear which way things will break next. Volatility is back and markets are still in a precarious position. Fed chairman Jay Powell threw markets a bone last Friday when he basically said all rate hikes are off until further notice and that he’s willing to scale back QT “if needed.” Markets have naturally rallied since Powell’s remarks.

If you still need proof that today’s rigged markets still require support from the Fed, here it is. But it’s far from clear the next crisis can be avoided at this point.

You don’t want to be heavily exposed to these markets. It’s far better to get out too early than too late. You should not be the last to be get ready. Start now to decrease equity allocations and increase your allocations to cash and gold so you can weather the coming storm.

Preparation means 10% percent of your investible assets in gold or silver and another 30% in cash. That allocation will preserve wealth and provide dry powder for bottom-fishing in the crisis to come.


Jim Rickards
for The Daily Reckoning


James G. Rickards is the editor of Strategic Intelligence. He is an American lawyer, economist, and investment banker with 35 years of experience working in capital markets on Wall Street. He was the principal negotiator of the rescue of Long-Term Capital Management L.P. (LTCM) by the U.S Federal Reserve in 1998. His clients include institutional investors and government directorates.

His work is regularly featured in the Financial Times, Evening Standard, New York Times, The Telegraph, and Washington Post, and he is frequently a guest on BBC, RTE Irish National Radio, CNN, NPR, CSPAN, CNBC, Bloomberg, Fox, and The Wall Street Journal. He has contributed as an advisor on capital markets to the U.S. intelligence community, and at the Office of the Secretary of Defense in the Pentagon.

Rickards is the author of The New Case for Gold (April 2016), and three New York Times best sellers, The Death of Money (2014), Currency Wars (2011), The Road to Ruin (2016) from Penguin Random House.

Photo by Vladislav Reshetnyak from Pexels

All the biggest stocks that are now in a bear market, in one chart

There are some BIG names in bear territory right now.

And the list of bear-market stocks keeps growing every day, as the Dow Jones Industrial DJIA, +0.21%  , the S&P 500 SPX, -0.15%   and the Nasdaq CompositeCOMP, -0.81%    continue to decline sharply this week in the wake of the Federal Reserve’s latest interest-rate hike.

A correction is typically defined as a 10% drop for a stock or an index from a recent peak, while a bear market is a 20%-plus decrease.

On Thursday, all three stock indexes carved out fresh 52-week closing lows. The Nasdaq briefly entered a bear market on an intraday basis, slipping to a low of 6,484.04 from its Aug. 30 intraday high of 8,133.30. Should the Nasdaq close firmly in bear territory, it would unofficially commence the end of the longest equity market bull run, by some measures, in history.

The Dow has been on the verge of joining the S&P 500 in a so-called death cross, where the 50-day moving average — a short-term trend tracker — crosses below the 200-day moving average. Chart watchers believe that such a cross marks the point where a shorter-term decline graduates to a longer-term downtrend. The S&P 500 formed the death-cross pattern earlier in December, and a slew of other highly watched stocks have done the same over the past few months: Facebook FB, +0.49%   back in September, Netflix NFLX, +0.60%  and AlphabetGOOG, +0.22% GOOGL, +0.55%  in November, Amazon AMZN, +1.02%  just last week, and Apple AAPL, +3.61% crossed the threshold for the first time in three years on Thursday.

As of the close on Thursday, the FAANG stocks all make the list of biggest bears — among the top 15 S&P 500 companies that are down 20%-plus from their 52-week highs. Some of the other big names rounding out that list: CitigroupC, +0.05%  , IBM IBM, -0.25%  , Wells Fargo WFC, +0.06%  , Bank of AmericaBAC, +0.10%  , AT&T T, -0.33%  , Exxon XOM, -0.29%  and WalmartWMT, -0.17%  , while J.P.Morgan JPM, +0.32%   and Mastercard MA, +0.18%   are hovering on the precipice. And there are plenty of big names beyond that top 15 that have slipped into bear territory since earlier this week: IntelINTC, +0.26%  , Boeing BA, +0.41%  , Comcast CMCSA, +2.01%  and SalesforceCRM, -1.46%   to name a few.

Over all companies on the New York Stock Exchange, this is the first time there have been more than 1,000 new 52-week lows since 2016. It’s only the fifth time this has happened since the beginning of 2009, according to the Dow Jones Market Data Group.

Five of the S&P 500 sectors are now in a bear market: industrials, financials, materials, energy and communication services (which previously dipped below 20%, though as of Thursday was only down about 18% from its 52-week high.

Beyond the Nasdaq’s brief intraday bear-market dip, the S&P Small Cap 600SML, +0.00%   is still the only broad index officially in bear-market territory — though the S&P 400 Mid Cap Index MID, +0.00%  is getting VERY close, at 19.98% down from its 52-week high as of Thursday’s close.

Though the Dow and S&P remain in the correction zone, not bear territory, many of the market watchers, movers and shakers who like to comment on such things are already calling the death of the decade-long bull run, and the onset of a bear market (most recently, bond king Jeff Gundlach).



More than half of S&P 500 stocks are now in a bear market

Even after the recent pain in the stock market, the S&P 500 Index is down only 3% in 2018 (excluding dividends). That’s not so bad when you consider the benchmark index rose 19% in 2017.

Still, more than half of the stocks in the index are in bear-market territory, showing how broad the decline has been.

A correction is typically defined as a 10% drop for a stock or an index from a recent peak, while a bear market is a 20%-plus decrease. Data supplied by FactSet show that 264 (53%) of S&P 500 SPX, -0.78%  companies are in bear markets.

Most broad indices in correction territory

Here’s where the broad indices were as of the close on Dec. 14, when compared with their 52-week intraday highs:

Index Decline from 52-week intraday high
Dow Jones Industrial Average DJIA, -0.84% -10.6%
Nasdaq Composite Index COMP, -1.11% -15.0%
S&P 500 Index SPX, -0.78% -11.6%
S&P 400 Mid Cap Index MID, -0.14% -15.6%
S&P 600 Small Cap Index  SML, -0.64% -20.2%
S&P Composite 1500 Index -11.8%
Source: FactSet

So all of these broad indices were in correction territory as of the close on Dec. 14, except for the S&P 600 Small Cap SML, -0.64% which was in bear territory.

Digging further

For the broad S&P indices, here’s the percentage of stocks in all the above indices in correction and bear territory as of the close on Dec. 14, as well as those that are down at least 50% from 52-week intraday highs:

Index Share of stocks down at least 10% Share of stocks down at least 20% Share of stocks down at least 50%
S&P 500 IndexSPX, -0.78% 77% 53% 3%
S&P 400 Mid Cap IndexMID, -0.14% 86% 68% 10%
S&P 600 Small Cap Index SML, -0.64% 92% 73% 18%
S&P Composite 1500 Index 85% 65% 11%
Source: FactSet
S&P 500 breakdowns

Here’s how the 11 S&P 500 sectors stood compared with their 52-week intraday highs as of the close Dec. 14:

S&P 500 Sector Decline from 52-week high
Energy -21.3%
Materials -20.4%
Financials -20.1%
Industrials -17.3%
Information Technology -15.3%
Communication Services -14.6%
Consumer Discretionary -14.0%
Consumer Staples -8.2%
Health Care -7.3%
Real Estate -3.2%
Utilities -0.3%
Source: FactSet

It is fascinating to see the utilities sector faring so well this year.

Worst decliners from 52-week highs

Here are the 16 S&P 500 stocks that were down at least 50% from their 52-week intraday highs through Dec. 14:

Company Ticker Industry Decline from 52-week high Market capitalization ($mil)
Nektar Therapeutics NKTR, +1.42% Biotechnology -67% $6,319
Coty Inc. Class A COTY, +0.41% Household/Personal Care -66% $5,490
Western Digital Corp. WDC, -0.02% Computer Peripherals -64% $11,224
General Electric Co. GE, -0.11% Industrial Conglomerates -63% $61,757
Mohawk Industries Inc. MHK, +0.34% Home Furnishings -59% $8,680
Newfield Exploration Co. NFX, -0.87% Oil & Gas Production -58% $2,945
Affiliated Managers Group Inc. AMG, +0.23% Investment Managers -56% $5,031
Invesco Ltd. IVZ, +0.46% Investment Managers -56% $6,972
IPG Photonics Corp. IPGP, -1.94% Electronic Equipment/Instruments -55% $6,301
Brighthouse Financial Inc. BHF, -1.04% Life/Health Insurance -53% $3,787
PG&E Corp. PCG, -1.67% Electric Utilities -52% $13,491
Schlumberger NV SLB, +0.02% Oilfield Services/Equipment -51% $54,146
L Brands Inc. LB, +0.61% Apparel/Footwear Retail -51% $8,482
Michael Kors Holdings Ltd. US:KORS Apparel/Footwear Retail -50% $5,700
Nvidia Corp. NVDA, -0.38% Semiconductors -50% $89,335
Halliburton Co. HAL, -0.13% Oilfield Services/Equipment -50% $25,405
Source: FactSet

You can click the tickers for more about each company, including news, charts, estimates, financials and ratings.

Biggest bears

The S&P indices are weighted by market capitalization, which explains why the FAANG stocks — Facebook FB, -0.05% AMZN, -0.27% AppleAAPL, -0.24% Netflix NFLX, -0.26%  and Google holding company AlphabetGOOG, -0.13% GOOGL, -0.17%  — have been so important during the long bull market. All were in bear markets through Dec. 14, except for Alphabet. The company’s class A shares were down 19% from their 52-week intraday high, while the class C shares were down 18%.

Here are the 15 largest S&P 500 companies by market capitalization that were in bear territory as of the close Dec. 14:

Company Ticker Industry Decline from 52-week high Market capitalization ($mil)
Apple Inc. AAPL, -0.24% Telecommunications Equipment -29% $785,268 Inc. AMZN, -0.27% Internet Retail -22% $778,395
Facebook Inc. Class A FB, -0.05% Internet Software/Services -34% $346,099
Bank of America Corp BAC, -0.17% Major Banks -26% $240,252
AT&T Inc. T, -0.13% Major Telecommunications -23% $219,941
Wells Fargo & Co. WFC, -0.20% Major Banks -30% $219,075
Home Depot Inc. HD, -0.23% Home Improvement Chains -20% $194,606
Citigroup Inc. C, +0.19% Financial Conglomerates -32% $134,366
AbbVie Inc. ABBV, -0.31% Pharmaceuticals: Major -32% $128,776
Philip Morris International Inc. PM, +0.07% Tobacco -26% $128,248
DowDuPont Inc. DWDP, +0.64% Chemicals: Major Diversified -32% $121,090
Netflix Inc. NFLX, -0.26% Cable/Satellite TV -37% $116,365
3M Co. MMM, -0.31% Industrial Conglomerates -25% $114,186
International Business Machines Corp. IBM, -0.11% Information Technology Services -30% $108,964
Altria Group Inc MO, +0.33% Tobacco -29% $99,082
Source: FactSet




Housing market now ‘reminds me of 2006,’ Robert Shiller says

‘I wouldn’t expect something as severe as the Great Financial Crisis coming on right now.’

Famed housing-watcher Robert Shiller said Tuesday that the weakening housing market reminded him of the last market top, just before the subprime housing bubble burst, slashing prices by nearly a third and costing millions of Americans their homes.

Home price gains moderated again in the most recent version of the closely-watched housing index that bears his name, which was released Tuesday, and Shiller, a Nobel Prize-winning economist, told Yahoo Finance that such data shows “a sign of weakness.”

Read: The man behind Case-Shiller on why the housing index has no Houston and why that’s no problem

Housing pivots take more time than those in the stock market, Shiller said. Still, “the housing market does have a momentum component and we’re seeing a clipping of momentum at this time.”

When a startled reporter reminded Shiller that 2006 predated the greatest financial crisis in a lifetime, the Yale economist acknowledged that any correction would likely be far less severe.

“The drop in home prices in the financial crisis was the most severe drop in the U.S. market since my data begin in 1890,” Shiller said. “It could be that we’re primed to repeat it because it’s in our memory and we’re thinking about it but still I wouldn’t expect something as severe as the Great Financial Crisis coming on right now. There could be a significant correction or bear market, but I’m waiting and seeing now.”



Your financial adviser’s ‘sleep easy’ portfolio may be a lot riskier than you think

A ‘balanced’ portfolio of stocks and bonds failed previous generations of U.S. savers, and badly, during at least two extended periods during the past century alone.

The 60/40 portfolio allocation has burned investors in the past.


The stock-market rollercoaster ride is enough to get any investor a little nervous. Yet, so far swings in the Dow Jones Industrial Average’s DJIA, -0.99%  are still only a tremor on any longer-term view. Stock prices are higher than they were even one year ago. Nonetheless for many investors it’s an overdue reminder that stock prices can fall — and fall a long way — as well as rise.

That makes it a good moment, say experts, to take stock of your portfolio. Are you taking on more risk than you want? Worse, are you taking on more than you realize? You may well be. And your financial adviser, if you have one, may not realize it either.

Conventional wisdom says that a “balanced” portfolio of stocks and bonds will cushion you from shocks and make sure your savings keep growing in all markets. It’s the philosophy behind nearly all financial advice offered in America today, and one that’s taught in most finance courses.

It’s also the theory behind those “balanced” index funds, “target date” funds and “glide path” funds that try to offer you a one-stop portfolio. It’s also the theory behind the portfolios offered by most “robo advisers.”

There’s just one problem: History says it may be wrong.

A “balanced” portfolio of stocks and bonds failed previous generations of U.S. savers, and badly, during at least two extended periods during the past century alone, financial historians note.

Worse, those occasions had more than a passing resemblance to the situation today: Expensive stocks, expensive bonds, and concerns about rising interest rates and rising inflation.

Why some people have déjà vu

Here are the numbers. For an entire decade, from 1938 to 1948, a portfolio of 60% U.S. stocks and 40% U.S. Treasury bonds actually went backwards in relation to inflation. That’s based on data compiled by New York University’s Stern School of Business, as well as inflation data tracked by the U.S. Department of Labor.

Over that period, not only did savers not get rewarded for investing, they got penalized. Their portfolios lost purchasing power. Furthermore, that’s before taxes. If inflation is 5% and your portfolio rises 5%, you earned a zero “real” return but you are getting taxed as if you earned 5%.

The story was even worse 30 years later. Someone who bought a 60/40 portfolio in 1968 saw it lose nearly a third of its value over the next six years in real terms. They were still underwater 15 years later — an aeon when it comes to financial planning for college funds or retirement. Not until 1984 did they even get back to where they had been during the summer of love.

The 60/40 portfolio v. surging inflation

Both periods saw surging inflation. “The basic vulnerability of the 60/40 portfolio… is rising inflation,” warns Ben Inker, the head of asset allocation at money manager GMO in Boston. Stocks have traditionally struggled during periods of inflation, historical analysis has shown, while bonds have fared much worse.

Consumer inflation broke double-digits twice during the 1970s, hitting 14% in 1980. “Prices went up,” Inker notes, “and your portfolio went down.” It was, he added, a “nightmare” for many investors.

But inflation wasn’t the only thing shaking markets, historical observers note. These two periods also saw other unexpected shocks to the existing financial order. The 1940s saw the unprecedented global crisis of the Second World War, followed by skyrocketing U.S. government spending and debts. The 1970s saw periods of economic stagnation, rising interest rates, and two damaging oil crises.

Today, inflation is, so far, reasonably tame. The official rate hit 2.9% over the summer but has since eased to 2.3%, which is mild by modern historical standards. But the Federal Reserve says it is concerned about pressures in the system that could erupt into surging prices.

Fed takes U.S. economy into unchartered waters

Meanwhile, the Fed is taking the economy into uncharted waters with its policy of “quantitative tightening.” For a decade, it kept interest rates artificially low and bought Treasury bonds to boost economic activity following the financial crisis. Now it is trying to reverse the policy. If “quantitative easing” and “zero interest rate policy” caused stocks and bonds to rise, say some analysts, reversing those policies could bring them back down to Earth. Nobody really knows.

Where does this leave the ordinary saver? Traders and active investors may see turmoil as opportunity. But for those who just want to invest and forget, is there an alternative to the 60/40 portfolio that may help you sleep easy?

“There is no such thing,” says Joachim Klement, head of investment research at investment firm Fidante. In today’s environment of “ultra-low interest rates and high valuations” any portfolio that is going to produce a reasonable return is going to take on a lot of risk, he warns. There aren’t simple panaceas, agrees GMO’s Inker. “There isn’t an obvious, here-is-the-better-thing, to do with your portfolio,” he says.

Lessons from ‘safe havens’ in the 1970s

During the inflationary 1970s, many investors added gold and other commodities, such as oil, to their portfolios. Both helped hedge against rising prices. Gold did not become freely tradable in the U.S. until the middle of the decade, when the federal government stopped linking it to the dollar. Gold then rose from $35 an ounce to more than $1,000 at one point. One mutual fund born out of the 1970s, The Permanent Portfolio, also includes real estate, natural resource stocks, and Swiss francs.

Some foreign stock markets, especially those of fast-growing, emerging markets at the time, such as Japan and Singapore, also helped investors beat the grimmer news at home. Data from stock market index company MSCI shows that during the 1970s, while its broader measure of US stock prices rose about 50% (before inflation), the Japanese stock index rose 400% and the Singaporean index even more.

This suggests emerging markets today might also help diversify your portfolio. Ironically, recently they have been in the eye of the storm, with many markets falling 20% or more. Some investors argue they are now looking good value.

What worked in the past may not work today

Hedge fund titan and Bridgewater head Ray Dalio has argued for including commodities and gold, alongside stocks and bonds, in what he calls an “all-weather portfolio.” Money manager Alex Shahidi added Treasury Inflation Protected Securities or TIPS, Treasury bonds issued by the U.S. Government that include specific inflation protection.

The late investment guru Harry Browne argued investors should keep one fourth of their money equally in stocks, bonds, cash (or short-term Treasury bills) and gold bullion. These portfolios typically required nothing more than occasional rebalancing to maintain the original proportions.

These would have helped investors in the 1940s and 1970s, analysis has shown. The obvious caveat, say investment analysts, is that what worked in the past may not work again. (But that is also true of the 60/40 portfolio.)

Inker says GMO is now “making extensive use of liquid alternatives” in the portfolios it runs for clients. This includes hedge-fund type strategies such as bets on global interest rates, mergers and the like. Such strategies are not easily accessible to retail investors.

Gold is still a go-to diversifier

Gold and silver are not what they once were, as the U.S. government has long since broken its legal connection to the dollar. But they still have their adherents. Charles de Vaulx, widely-respected money manager at IVA funds, holds 5% of the IVA Worldwide fund in gold bullion as insurance against hyperinflation or crisis.

Gold, some contemporary analysis has shown, still retains some power as a diversifier because it frequently moves in price independently of stocks and bonds.

Fidante’s Klement argues that “senior bank loans,” consisting of credits to corporations, may be an appealing diversifier. They offer some protection against inflation and rising interest rates, he argues, because the loans are on floating rates. Inker warns that the creditors’ protections, in the form of covenants, are generally not as good as they were in the past.

Cash can still be king—sometimes

And then there is the simplest asset of all: Cash. This includes Treasury bills, money market funds, short-term Treasury bonds, and Certificates of Deposit. These assets typically have produced poor long-term returns, which one reason why they tend to be shunned on Wall Street (another is that they generate low fees).

But they are generally highly liquid, and easy to buy and sell. Their price doesn’t fall in market turmoil, and their interest rates will rise with the Fed’s. “The obvious thing that everyone knows about is cash,” says GMO’s Inker.

“There are times to sit on cash,” wrote investment legend Sir John Templeton. Not only did it not go down in a crash, he noted, but it then enabled you to take advantage of investment opportunities later on.

A study conducted on behalf of Cambridge University a decade ago recommended a long-term portfolio of 80% stocks and 20% cash. Warren Buffett, in his 2013 letter to investors, recommended a basic portfolio of 90% stocks and 10% short-term government bonds.

Cash need not be limited to U.S. dollars either. While the greenback has been on a tear lately, in the past investors have used other currencies, including the euro, the former Deutsche mark, and the Swiss franc to diversify risks.