Both Ray Dalio and Warren Buffett are highly respected investors. Dalio is on record stating that cash is trash and that investors should be buying this market, rather than seeking safety in cash. Buffett is on record stating that cash is king — “some day in the next 100 years when the world stops again, we will be ready.”
Who is right? Could they both be right?
Basically, Dalio and Buffett come from different perspectives.
Assuming a sound currency, cash in a portfolio is safe but it drags the performance. Historically, being fully invested has significantly outperformed holding cash and is very likely to do so in the future. So, over the long term, Dalio is correct for the retail investor. However, the downside of being fully invested arises from the major fluctuations that are a part of the market. Investors should never put themselves in a position to need to sell when markets are down. The Monday Morning Millionaire Program prevents that by encouraging an asset allocation with a high percentage in cash.
Buffett, on the other hand, is waiting for a deal in the billions. During the financial crisis of 2008 Buffett made about $1.75 billion in cash and about $1.35 billion in stock by investing in troubled Goldman Sachs — a 62% return on a five-year investment.
Buffett is looking for another opportunity like that one.
Both Dalio and Buffett are correct but they come from different perspectives.
We Monday Morning Millionaire Program members don’t need to concern ourselves with issues like these. We are happy when markets drop and present us with bargains. We are happy when markets rise and allow us to take profits.