Should You Hold Cash While You Wait For The Stock Market & Real Estate Market To Crash?

Lots of YES… and a little bit of no.

First, the no.

Statistically speaking, having your money invested will give you greater returns over the long run. Even if there are some bumps along the way, you’ll do best by investing your money in vehicles that give you a return.

Also, the US dollar is headed for an inflationary time, so holding cash for an extended amount of time will be foolish. Your buying power will slowly disappear.

Second, the yes.

Now everything I said above is during ‘normal’ market conditions. We (the world) are in a very precarious position. I don’t mean the world is going to end or anything like that… just that there is a strong likelihood of a significant financial reversal.

Here are just a few things that should give you caution:

• We are in the second longest bull market in modern financial history. This doesn’t mean we’ll have a stock market crash tomorrow, but it means we are closer to the end rather than the beginning.
• An enormous amount of printed fiat money has been created over the past decade. This money was created to boost the economy and arguably worked well. But, just because it worked doesn’t mean it’s a good thing. The correction that will eventually happen will be worse than normal.
• The world in general is a bit disgruntled. Everything from the US presidential election, to the EU exit votes, to the South China Sea… there are a variety of issues that could upset the apple cart.
• We (the world) have a massive debt problem. This has been caused by over spending, over borrowing, and over creating (fiat money). Yes, this debt could go on forever, but the private market is already starting to see pain. Corporate bonds, retirement programs, car loans, and student loans will eventually be unsustainable. With rising rates and a slowing economy, these issues will only be exacerbated.

Now, all of these things that I have just listed pose a significant threat to the economy. We could see major pain over the next several years.

Or… we could see a lot of prosperity. We could avoid all of those problems and continue to do well.

The point is that even if we can point out all of these issues and we think a market crash is eminent, we could still be wrong. And if we’re wrong, then we wasted time waiting for something that never happened.

Regardless…

Having cash on hand is the ultimate call option. This means that if you have lots of cash when things go bad (i.e. stocks crash), you are perfectly positioned to buy.

This is essentially what you’ve suggested in your question, and your thinking is in the right place.

Now is the time to start thinking of this strategy. Preparing to act when there is chaos in the market.

At the same time, you should always be hedged.

Also, as a side note, if you are holding your $100k is USD, then it’s been a great investment for the past several years. The dollar index is very high right now, so in terms of value, holding the USD has done better than even most stocks.

Source: Bloomberg

However, over the past several weeks, the USD is showing signs of weakness which may be a preview of what is to come.

If the dollar does in fact continue it’s downward plunge, then holding all of your wealth in USD currency will be a bad investment.

You always want to buy low, sell high. If you are holding an asset (like the USD), then you should start to think of places to transition into.

Look for things that are selling for cheap, so you can buy with your strong USD. Trends don’t last forever, as everything is cyclical. I am preparing for this change with my personal investment. I write about it several times a week for free.