i think it is very important to have a systematic approach to determine what percentage of the fund should be in cash.
i now employ the method used by Ken Fisher who currently manages 61 billion usd.
he considers that each year, the market will do one of four things ...
up-a-little
up-a-lot
down-a-little
down-a-lot
he says that unless one thinks that the market will be down-a-lot, one should be fully invested.
only if he expects down-a-lot would he be in cash.
notice that he stays fully invested in stocks even if he thinks that the market will be down- a- little.
where i differ is that i use this method, but only look at the market in six month chunks.
i expect our market to rise in the next six months,
currently the fund i manage is 97% in stocks, and 3% cash.
