Matthew Zeigler, managing director at Sunpointe Investments, St. Louis, which manages $352 million and oversees more than $3 billion in client assets.
Many investors began this year happy to hold cash in their portfolios. After all, why risk a volatile stock market and uncertain economy when you can earn a guaranteed 5% annually in US Treasuries? But: Stocks shocked everyone by rising 20% through the first seven months of 2023. So what should long-term investors do with their cash now that the chances of recession are receding and they’ve missed out on double-digit returns? Investment manager Matthew Zeigler explains…
Don’t continue the wait-and-see approach. If stocks keep rising in 2023 and 2024, you’ll beat yourself up for doing nothing or you’ll end up jumping in at much higher prices. If the stock market plummets, you may be too scared to invest. Better strategies…
Use the cash to rebalance your portfolio back to your desired long-term allocations. If your plan is to maintain 60% in stocks and 40% in bonds…and your current allocation is 75%-25%…purchase enough bonds to get back to 60-40. If you still have cash to invest, get more granular. Large-cap growth stocks have soared in price, so add to undervalued areas of your stock portfolio that have lagged such as large-cap value stocks.
If you are investing in stocks with a 10-year or longer time horizon, consider putting all your accumulated cash to work at once. Also heed the “granular” advice above.
If you are investing in bonds, spread out your purchases equally over the next year. Reason: Fixed income is risky now with little upside—the Fed may not be done raising interest rates, which drives down bond prices. So putting cash to work slowly in the bond market may protect you.