Balancing Equity Risk: Is Cash King Today?
If rates are set rise, some investors wonder if cash is a better bet than bonds in a balanced portfolio.
Question: Can I use cash to provide diversification for the stocks I hold in my portfolio? With rising rates, it doesn't look like a great time to buy bonds.
Answer: The short answer is that cash can help offset one's equity risk. As you allude to in your question, cash won't lose ground during an equity downturn; nor will your cash depreciate in the event that rates move higher. But depending on your time horizon, bonds may be a better choice, especially when factoring in inflation.