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Millionaires Invest in Cash But Watch Stocks

This article was written by in Investing. 5 comments.


A survey from HSBC Bank reveals that millionaires take a position on cash higher than what financial planners generally advise. 472 “mass affulent” individuals — those with at least $1 million available to invest — were surveyed, and 34% have at least 20% of their investable assets in cash. The mass affluent watch stocks even if they aren’t invested right now. Perhaps they are waiting until the market sentiment is a little better.

Based on my May balance sheet, I have $40,381 invested in mutual funds (almost completely equity funds) and ETFs and $19,342 in investable cash. My cash position is 32%. That’s probably too high when looking at the long-term picture, but having less cash than that wouldn’t provide me with an emergency cushion.

If the mass affluent are waiting for a better time to invest in stocks, the contrarian in me says this is a good time to invest. By getting in before a “mad rush,” one may be able to ride the rising tide. Market timing is dangerous, though, so good luck.

Speaking of HSBC, HSBC Direct raised their interest rate on their savings account to 4.8% APY, one of the highest rates available online.

Updated March 29, 2011 and originally published June 20, 2006. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 5 comments… read them below or add one }

avatar samerwriter

I’m not sure it’s correct to conclude that the affluent are waiting for the right time to put their cash into the market. I think it’s likely that they are conservative in their investment approach, and like to have a substantial cushion to weather bad times.

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avatar Luke Landes ♦127,500 (Platinum)

Samewriter, right, but to evaluate, one would have to look at the trend of cash positions over time to see if we are in a period of reduced equity investment among the “mass affluent” or if there’s no significant deviation.

If we are in a period in which the affluent have significantly less in equities and more in cash than “average,” then there’s an opportunity to invest in equities and wait for the affluent to return to the mean.

If there has been no significant deviation over time, then it would seem that the affluent are “conservative” compared to advisors’ predictions, as you say.

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avatar saving advice

I also think that the affluent tend to spend more and therefore need a higher cash holding than others. Still, and interesting study…

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avatar terry

And the poor fork over their money to HSBC.

Is this a great country or what?

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avatar empty spaces

i have about 25% of my network in cash.

its probably going to stay that way. i’m not looking to get more than 4-5% inflation return on it. its just a hedge against life’s unexpected accidents.

plus if something happens to me i feel comfortable knowing that for a whole year i dont need a job just to pay the rent and buy groceries.

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