There’s no doubt about it…
The coronavirus pandemic is changing consumer spending habits. And with much of the country facing a new surge in COVID-19 cases, expect more economic pain ahead.
But there is a simple step you can take to protect your wealth during these uncertain times… And many Americans are already doing it.
While unemployment remains high, Americans have slashed their spending… increased their savings… and reduced their debt at a record pace.
According to the Bureau of Economic Analysis, the personal savings rate hit a historic 33% this year. It’s the highest in 45 years.
And data from the Federal Reserve shows credit card debt is down almost $100 billion from the start of the year, to $995.6 billion.
It’s the first time since September 2017 that card balances have fallen below the trillion-dollar mark.
Now, it’s great to see so many Americans saving money at a higher rate. But at PBRG, we believe the best way to build wealth is with a holistic strategy… Not just one built on saving and curbing your spending habits.
You see, while both may be a good rule of thumb, having too much cash in your portfolio can be risky, too.
The U.S. dollar can (and does) devalue relative to other currencies. And there’s always the risk that inflation will eat away at your cash savings.
On top of that, if you keep your cash at home, you could lose it to theft or in an accident. If someone burglarizes your home or it burns down… there goes your retirement.
So today, I’ll tell you how much cash our strategy says you should save, if you want to come out of the pandemic with your nest egg intact…
A Holistic Wealth-Building Plan
You can’t talk about how much cash you need to save before determining where cash fits in your overall portfolio.
At PBRG, we use a highly diversified portfolio. It includes conservative investments… speculative plays… hedges… and true alternative assets.
In January, Daily editor Teeka Tiwari overhauled our asset allocation model.
Here’s Teeka…
Now, I believe the market will continue to chug higher in the 2020s. But there’s also a good chance the next 10 years won’t be as good as the last.
That means traditional stocks and bonds might not meet expectations over the next market cycle. If they deliver subpar returns, it’ll be imperative to have exposure to other asset classes.
So your asset allocation is now more important than ever… And my solution is to readjust our asset allocation to prepare for this next market cycle.
Of course, no one could have predicted the COVID-19 outbreak. But Teeka added new asset classes to diversify against the unknown.
And the timing couldn’t be better…
You see, our asset classes now include cryptos, collectibles, private markets, as well as old standbys like gold, real estate, stocks, and bonds – and of course, cash. (Palm Beach Letter subscribers can read our annual asset allocation guide right here.)
Many of these assets are uncorrelated to the stock market. So if the pandemic does cause another crash, they’ll hedge your wealth.
And while cash remains an asset class, we did increase how much we allocate to it. We now recommend you keep up to 10%.
That includes checking and savings accounts, money markets, certificates of deposit, and certain cash-like exchange-traded funds and mutual funds.
Always Keep Some on Hand
Cash is the universal asset class because everyone needs it. And we like it because it provides optionality.
You never know what life can throw at you. Stocks could fall 50% and give you a rare shot to buy dirt-cheap stocks… You could discover a lucrative business opportunity… Or you might get blindsided with a huge medical bill.
Whatever it is, cash typically “meets the need” better than anything else. Therefore, it’s crucial to hold some.
Always keep some cash on hand. Whether it’s for an emergency, a bear-market buying opportunity, or a pandemic, you’ll be glad you had some.
Regards,
 |
Chaka Ferguson
Managing Editor, Palm Beach Daily
P.S. Because of our track record, Teeka’s been called America’s No. 1 investor. And our success is due to proper asset allocation.
Now, Teeka’s putting his track record and reputation on the line to reveal what he believes will be the top-performing investment of the decade.
We love this idea because it crosses asset classes. In fact, Teeka’s so convinced of this idea’s potential, he firmly believes it’ll be the single-best place to grow your money in the next 10 years.
It’s a groundbreaking technology that’ll disrupt numerous industries – from health care to national security. And you can get the inside scoop right here…