Ionel Van den Berg @Lazacoin: "𝐓𝐡𝐞 𝐜𝐨𝐮𝐧𝐭𝐞𝐫𝐢𝐧𝐭𝐮𝐢𝐭𝐢𝐯𝐞 𝐩𝐨𝐰𝐞𝐫 𝐨𝐟 𝐛𝐨𝐧𝐝𝐬/𝐜𝐚𝐬𝐡..."

Netherlands

𝐓𝐡𝐞 𝐜𝐨𝐮𝐧𝐭𝐞𝐫𝐢𝐧𝐭𝐮𝐢𝐭𝐢𝐯𝐞 𝐩𝐨𝐰𝐞𝐫 𝐨𝐟 𝐛𝐨𝐧𝐝𝐬/𝐜𝐚𝐬𝐡 𝐝𝐮𝐫𝐢𝐧𝐠 𝐚 𝐜𝐫𝐚𝐬𝐡 Most investors see cash as a drag on returns. And during a strong bull market, they're probably right. But there's another way to look at it. Imagine you have a portfolio worth $100,000: $85,000 in equities $15,000 in bonds/cash Your portfolio rises strongly. Your equities grow to $120,000, while your bonds remain around $15,000. You didn't sell anything. But your bond allocation has now fallen from 15% to just 11.1%. That's where it gets interesting. If some equity positions become significantly oversized, you can trim them according to your rules and move part of those profits back into bonds. You're not predicting a crash. You're simply allowing your strongest positions to rebuild your liquidity buffer. Then the opposite happens. 📉 The market corrects. Your equities fall sharply, while your bonds/cash are relatively more stable. Suddenly, that same $15,000 buffer represents a much larger percentage of your portfolio. You didn't add a single dollar. Your buying power simply became larger relative to the portfolio. And now you have something extremely valuable: Capital available when assets are cheaper. That's why I don't see bonds/cash simply as a return drag. I see them as optionality. The goal isn't to predict when the crash comes. It's to make sure that when it does come, you're not forced to sell your best assets at the worst possible moment. And perhaps the most counterintuitive part: The better your equities perform beforehand, the more opportunity you may have to rebuild that buffer through disciplined profit-taking. Not because you know a crash is coming. But because your rules tell you when a position has become too large. So maybe the question isn't: "Why am I holding 15% in cash when the market is going up?" Maybe it's: "What will that 15% be worth to me when the market eventually goes down?" 𝐁𝐮𝐢𝐥𝐝. 𝐂𝐨𝐦𝐩𝐨𝐮𝐧𝐝. 𝐑𝐞𝐩𝐞𝐚𝐭. 🚀 — Ionel $SPX500 $NSDQ100 $IB01.L (iShares $ Treasury Bond 0-1yr UCITS ETF) $MU (Micron Technology, Inc.)

Not investment advice. The author may have financial interests in the mentioned instruments.