Does a money market account count towards diversification in your portfolio along with stock funds?
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Answer:
You bet. Money market funds are perfectly stable (never change in value). So they are "the sure thing" in your portfolio. Bonds can fluctuate in value based on what bond prices are doing. And of course, stocks can really vary a lot from day to day (witness yesterday...)
You can never put all your eggs in one basket, but money market investments are always one of those baskets...
Yes, even holding money is considered diversification by the most sophisticated investors.
Of course it does. if you're having to ask, then you need a broker to manage your finances. z
of course. cash is an asset class. you should be diversified bonds, stocks, cash, etc and within categories, as appropriate
does it matter whether it counts towards diversification? What happens if it doesn't?
In a bull market cash is trash. In a bear market, cash is king. In the kind of market we have today, cash is worthwhile to have so you have something to invest with, as there no doubt will be some bargain buys. The trick is, to get that cash you have to sell stocks before they fall, as they have yesterday and today. So yes, building cash in a portfolio can be both an asset allocation strategy (in a bear market) and a short-term investing strategy (in a bull market that is experiencing an intermediate correction).
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Yes. You need some money in a low risk investment in order to provide some degree of stability to your portfolio. This becomes especially important the older you get.
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