Personal FinanceStephen Lovekin/Getty ImagesJoey FrenetteI find much of Suze Orman’s advice to err on the side of caution. Given many of her viewers are in or closing in on retirement, I have no issue with a more conservative tilt when it comes to one’s personal financial plan, whether we’re talking about the percentage to draw down (Orman preserves a lower percent) from one’s nest egg, distaste for high-interest debt, or maintaining a slightly fatter emergency fund (eight months as opposed to six months).While her more cautious financial approach may be less exciting for younger viewers who may be inclined to be okay with outstanding debts, with a willingness to bet on exhilarating growth and momentum stocks or leave a bit less of an emergency financial cushion, I find her long-term approach to be more than worth getting behind. Though Suze Orman may be somewhat cautious relative to financial guru peers, most notably Dave Ramsey, she is no fan of cash-hoarding due to recession fears.Indeed, timing the market is a bad idea—the market will have no problem leaving you behind if you’re not invested. Still, having some cash sitting on the sidelines, I believe, can be a good thing if valuations on stocks are stretched and you envision yourself buying more shares of companies come the next inevitable market correction.
Hoarding cash can be a bad idea if there’s based off of fear of corrections. However, having some dry powder can pay off if the equity risk premium is unenticing and HYSAs have a bit more yield to offer.
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Is having a cash pile really a “mistake”?While I’m not against staying invested (for the most part) and sticking with a long-term game plan, I think it’s up for debate as to whether it’s a “huge mistake” to have some amount of cash in a high-yield savings account (HYSA), just waiting to be put to work when opportunities in the stock market are more abundant.For the most part, sitting in cash and shying away from stocks due to volatility isn’t the best idea, given it’s impossible to time the market’s ups and downs. That said, if you deem stocks as expensive and you sense bubbles in some parts of the technology sector, I’d argue that having a cash position apart from your emergency savings is not the worst idea in the world. Now, I’m not an advocate of timing markets and waiting for corrections. The opportunity cost can be pretty high, especially for younger investors who should concentrate more on stocks than bonds.That said, if you’re an older investor who’s already quite heavy in stocks and you can’t sleep at night because you’re wondering why Warren Buffett’s Berkshire Hathaway (NYSE:BRK-B) is hoarding a record cash pile, I’d argue that having some dry powder can come