Your 401K or Other Investments: How much should you keep in cash?

Brett Arends gives us a nicely written reminder that needs continual repetition:

...your long-term investment returns will overwhelmingly depend ... upon just two things: asset allocation - how you spread your money between investments like stocks and bonds - and the value of those investments when you buy them.

He then reviews the evidence behind this assertion and gives some hints about how to make those two factors work in your favor.

When the markets look really bad, should you go entirely into cash? For example, think of the financial crisis of 2007-2008. How much should you keep in cash during such tough times?

Maybe more than you think.

Even during bad times, Arends suggests, 40% cash was about the most bearish a long-term investor would want to be.

Access article from here.