Our answer
XSP is an excellent security. Except for its money market holdings, your portfolio could be entirely in XSP. Note that it is trading at the high end of its 52 week range. One of these days, it will correct (drop 10% ) or more – no one knows when.
Your cash or near-cash, such as your money market holdings, won’t drop a penny. So, be patient and wait for XSP to drop and then use your cash to buy it at bargain prices.
When XSP drops 10% for a while, a historical certainty, and you use your cash to buy more, then it is the same as if your cash earned 10% during the time it takes for XSP to return to its former level.
Please review asset allocation. We wrote about parking money in some detail, previously. All successful investors (almost) always have a large percentage of their portfolio in cash. They invest all their cash when the market drops by 20%, and the ones with a high risk tolerance borrow to invest when the market drops further.
From Gerald Loeb, the most quoted man on Wall Street before Warren Buffett, nearly 80 years ago: “It is far better to let cash lie idle than to buy just to “keep invested” or for “income.” In fact, it is really vital—and just this one point, in my opinion, represents one of the widest differences between the successful professional and the loss-taking amateur.”
With the habits of the Monday Morning program, luck hardly matters.
Good luck!
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