Cash is for emergencies not portfolios

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A scary repercussion of being cancelled and jobless is how fast the money runs out. Whatever counter measures you put in place — selling the car, no champagne before 3pm — regular outgoings soon swamp them.

Article originally published by The Financial Times. Hargreaves Lansdown is not responsible for its content or accuracy and may not share the author's views. News and research are not personal recommendations to deal. All investments can fall in value so you could get back less than you invest.

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13 Oct 2023

This is why financial advisers recommend keeping a certain proportion of assets in ready cash. You simply never know when you’ll be on stage at a conference telling a joke about Miami being underwater.

The rule of thumb is an amount equivalent to between three and six months of income. And indeed in the UK the average person has £17,000 in savings accounts, according to the latest Bank of England data — exactly half the mean annual income.

Yeah right! Averages are nonsense, with most of us either unwilling or unable to put anywhere near enough aside. But how should investors think about cash? What is the right amount in the context of a diversified portfolio such as a pension fund, where access to liquidity is not the point?

I’ve been asked these questions a lot this week due to the conflict in Israel. Unexpected events often have