I'm Decades Away From Retirement. Here's Why I Still Have a Large Pile of Cash in My Portfolio

Key Points

• It's important to invest aggressively when retirement is decades away.

• While my portfolio houses plenty of stocks, I have a decent portion of it in cash.

• Having cash gives me both flexibility and peace of mind.

• The $23,760 Social Security bonus most retirees completely overlook ›

As someone who writes about personal finance day in, day out, I'm well aware of the importance of saving and investing for retirement. I know that retiring on Social Security alone is not a good option. Even if those benefits don't end getting cut broadly like many people fear, they're still unlikely to suffice in covering my expenses.

That's why I've made a big effort to not only set aside money for retirement in a variety of accounts, but also come up with a personalized investment strategy. And much of that strategy centers on buying and holding onto quality stocks.

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But I also happen to have a pretty large pile of cash in my portfolio. And while some experts might say that's a mistake, I happen to disagree.

What cash does for me

The purpose of having cash in my retirement portfolio is twofold -- to give me options, and to give me peace of mind.

A lot of people will say that timing the market doesn't work. But while I agree that you perhaps can't time the market to the day, you can assess the broad picture.

Many folks anticipated that the stock market would plunge in April following President Trump's tariff announcements. I assumed that would happen, too. And one thing that made me feel better was knowing that I had a pile of cash at the ready to pounce on investing opportunities at that time.

In fact, you never know when the market will take a tumble. By having cash in my portfolio, I'm able to act when stock values suddenly get more attractive.

I also like the idea of having a portion of my retirement portfolio protected from market swings, even though I'm not close to being ready to start using that money.

I've been writing about investing long enough to know that fluctuations are normal. Yet it still doesn't make it any easier to look at portfolio losses on screen.

Knowing that a chunk of my savings is protected gives me peace of mind. So while I may be losing out on higher returns for a portion of my money, some things -- like peace of mind -- are worth paying for.

You need to think about your own comfort level

Some people are more wired to accept risk than others -- in the context of investing and other things. But saving and investing for retirement is something that's supposed to bring you peace of mind. And if you invest too aggressively, to the point where you find yourself actively worrying about stock market fluctuations, then you're not getting that.

While you can't afford to be too conservative in your investments, such as steering clear of stocks completely, it's OK to minimize your risk profile to a reasonable degree. And if you're not sure what that looks like, talk to a financial advisor.

Even though I spend my days writing about financial matters, I still consult an advisor on a regular basis. And if you're not confident in your investing strategy, or you simply want more guidance, it definitely pays to get a professional's input.

The $23,760 Social Security bonus most retirees completely overlook

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