The discussion begins with a reference to Proverbs 14:26, emphasizing that the fear of the Lord provides confidence and refuge, not money. This scripture is connected to the concept of stewardship, often associated with financial management. The discussion highlights that true security and assurance come from God, not from financial wealth. Many people mistakenly equate financial security with having money and envy the wealthy, but real confidence should be placed in God.
The conversation transitions to practical aspects of financial stewardship. Shanna explains what counts as cash in investment strategies, emphasizing that it should be investable money like US currency, savings accounts, and money market funds. Different types of cash, including emergency funds kept at home, may not be part of an investable portfolio. The stability of cash, as opposed to its growth potential, is discussed, highlighting its role as a medium of exchange and a store of value.
There’s an exploration of how the cash portion of an investment portfolio serves different purposes depending on the investor’s stage in life. For those in the accumulation phase, where the goal is to grow investments, cash acts as a place to collect dividends and make reinvestment decisions. For those in retirement, it provides safety and stability to cover short-term needs without the volatility of other investments.
Further, the discussion delves into the impact of cash on overall portfolio performance. Cash can provide stability and reduce volatility, but it can also drag down performance during market upswings. Different allocations of cash are recommended based on an individual’s investment life cycle and risk tolerance. The weighted average returns for portfolios with different cash allocations are illustrated.
Finally, Shanna addresses how the current economic climate affects the emphasis on cash. In the past year, cash yields have increased, making it a more attractive option, although it still lags behind inflation. The economic situation influences how much cash one might want to hold, balancing the need for stability with the goal of keeping up with inflation.