INVSTR039 How much cash should you hold vs invest? What’s the right mix? (613 words)

Wondering whether you have the ideal ratio of cash to other investments in your portfolio. This article will help you to distinguish between emergency cash, cash investments and cash equivalents, as well as discussing cash ratios applicable to different life stages.

There are always two ways for individuals to hold cash – emergency fund cash and investment cash. This needs to be clarified before discussing any investment mix.

Emergency cash (not part of your investment portfolio)

Life has a habit of delivering the unexpected, so it’s a good idea to keep 3-6 months of living expenses in cash, readily accessible in a savings account or mortgage offset account. Make that 6-9 months if your income is variable and you would like extra peace of mind. Other reasons for setting aside cash might include saving for a particular goal, such as a car purchase, an overseas holiday or a wedding.