Cash in a Portfolio

Cash alternatives (“cash”) fill several needs for investors, although they should not be viewed as a primary, long-term investment.

How much cash should I hold in my portfolio?

By “cash,” we don’t mean just dollar bills or even the money in your checking account. We use the term as shorthand for a spectrum of assets that are typically very stable in value and can usually be liquidated quickly when you need to cover an expense. Short-term Treasury bills and money market funds are the classic example.

  • Cash alternatives have important uses, but they are not an appropriate primary, long-term investment for most investors.
  • For most investors, cash should not represent the majority of their asset allocation dollars.
  • Retail investors, on average, hold much more cash than their financial advisors recommend.
  • Similarly, individual retirement accounts (IRAs) hold significantly more in cash than warranted by the long time horizons typical of these accounts.
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Wells Fargo Investment Institute, Inc. is a registered investment adviser and wholly-owned subsidiary of Wells Fargo & Company and provides investment advice to Wells Fargo Bank, N.A., Wells Fargo Advisors, and other Wells Fargo affiliates. Wells Fargo Bank, N.A. is a bank affiliate of Wells Fargo & Company.

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