Kiasu Investing Rule #1: Allow your idle cash to sit idle in the bank

Yes, you heard us right. Contrary to what most investment advisers out there advocate, we strongly believe in leaving plenty of spare cash lying idle in the bank. Yes, bank deposits interest rates are so paltry, they all say. After factoring in inflation, you are effectively suffering negative interest of x% per year.


Yes, we do acknowledge the above argument against keeping cash in the bank. However, we still firmly believe in holding on tight to your cash. This is especially true when markets (stocks and property) are close to or have already exceeded previous peaks. In such circumstances, we typically try to hold on to at least 50-60% of our "investible" capital (exclude emergency funds) as cash. This is of course much easier said than done for most investors. 


We are strongly of the view that it is also this "cash", which suffers from negative interest of x% per year, that has potential to land you the multi-baggers in the trough of a bear cycle, when cash is scarce and truly king. So what is a 10 - 20% loss against inflation compared to a potential 200-300% gain? For us this is a no-brainer!


P.S:
1) Some may ask, why not hold quality bonds instead of cash? Historically, equity and bond prices tends to go in inverse directions. Yes, to us this is also a plausible alternative but sometimes, you do need a large amount of cash to plough into bonds.


2) Above assume you are a better investor than a blindfolded monkey throwing darts, as you need to be able to identify potential multi-baggers to put your hard earned $$$ to work (and yes, we believe that even blindfolded monkeys can hit multi-baggers during times of doom and gloom).


3) If you happen to be those lucky ones who works for a bank (or your spouse do) that offers staff much higher interest rates on deposits... then this rule works like a charm.