How Much Cash Belongs in a Portfolio? It Depends on the Job You Give It

Money set aside for a tax bill can sit in the same account as money waiting for a market fall. The balance adds it all together. Some of that cash, though, is already promised to a particular expense.

That distinction matters when markets turn. A fall in share prices may create opportunities just as a job or business income becomes less secure. The cash that looks available for investing may also be the money needed to keep paying bills.

How much cash belongs in a portfolio therefore starts with the job it has to do. Money reserved for spending faces different constraints from money held in the hope of investing later.

Here, cash includes bank balances and cash equivalents such as Treasury bills. These are different holdings, with different yields and risks. Treasury-bill returns do not describe every bank account.^1,2

The same cash can have competing jobs

Steven Feldman emphasizes flexibility. In his Wealthion interview published October 30, 2026, he describes the appeal of earning interest while keeping money available after a correction. Discussing Berkshire Hathaway, he calls it “waiting for the thing to break”: capital that could become useful when other investors are dealing with losses.³

Mark Skousen places more weight on participating in a technology-led advance whose turning point he believes is hard to identify. In his September 18 video, he describes himself as fully invested, with “some cash for special situations.”⁴

Those are different views of the trade-off between staying invested and waiting. A reserve for emergencies has a more immediate constraint: a repair or medical bill can arrive regardless of what markets are doing.

Known expenses create a similar link to time. Jonathan Wellum describes matching one- and two-year bonds to clients’ expected cash outlays in his September 21 discussion. He is talking about bonds, but the connection between an asset’s payment date and a spending date also explains one reason people reserve cash.⁵

Cash also figures in how people feel about their finances. A 2016 study of 585 United Kingdom bank customers linked larger readily available balances to greater life satisfaction after accounting for factors including income and investments. It found an association, not evidence that adding cash causes happiness.⁶

These purposes can coexist until the same money is needed for two of them. A market fall may make an investment look attractive while also increasing pressure on household income. Cash already committed to spending does not become uncommitted simply because prices have fallen.

A yield today does not settle the cost of waiting

Interest can make that wait feel easier. The Federal Reserve’s three-month Treasury benchmark yielded 4.24% on November 9, 2026. That is an annualized market yield, rather than a rate paid on every cash balance.^2,7

The income can change. Since 1981, the same benchmark has ranged from about 17% to 0%.⁸ Yields on variable-rate cash holdings generally fall when short-term rates fall, and cash-account rates can differ substantially.² A rate quoted today does not lock in what a reserve will earn over the next decade.

Inflation adds another moving part. In June 2022, consumer prices were 9.1% higher than a year earlier, while the three-month Treasury benchmark averaged 1.54% that month.^9,10 A positive interest rate can still look small beside the rise in everyday prices.

The November 9, 2026, yield was 0.54 percentage points above September’s 3.7% annual inflation rate, before taxes.^7,11 September remains the latest available annual reading because the October release cannot provide the headline annual comparison without the missing October 2025 index.¹²

Both comparisons put an annualized yield beside inflation that has already happened. They illustrate the tension between interest income and rising prices; they do not measure a realized inflation-adjusted return or establish what inflation will be during the next holding period.

Stability has a different value over different periods

The long-run growth trade-off is substantial. The 2026 UBS Global Investment Returns Yearbook reports annualized real returns, meaning after inflation, of 0.5% for United States Treasury bills and 6.6% for United States stocks over 1900–2025. Stocks delivered those returns with much larger ups and downs.¹³

The comparison uses Treasury bills to represent cash investments. The positive real return matters: this history does not show that cash investments cannot grow. It shows how much less growth they delivered than stocks over that particular long period.

That comparison cannot determine what belongs in a reserve for next year’s bills. Spending money has to be available when it is needed, including during periods when markets fall. Cash held for a distant goal faces a different trade-off because low growth may make the goal harder to reach.¹

Three factors connect the balance to the goal

A percentage alone cannot distinguish those jobs. U.S. Bank publishes a rule of thumb of 2% to 10% in cash or cash equivalents, while acknowledging that circumstances vary.¹⁴ The same percentage could represent a substantial spending reserve for one household and very little for another.

Vanguard’s research examines cash through three factors considered together for each goal: risk tolerance, time horizon and funding level.¹⁵

Risk tolerance includes both comfort with losses and the financial ability to absorb them. Someone may feel calm during a market decline yet still be unable to afford a loss on money due for a fixed payment. The spending obligation changes the risk that money can carry.¹

Time horizon is the period before the money is needed. A short deadline leaves less time for recovery from a market decline. Feldman’s example of a sharp portfolio loss just before retirement brings that timing problem into focus.³

Funding level compares current savings and planned contributions with the amount required for the goal. A nearly funded goal needs less additional growth, while a loss could undo progress. A goal that is still far from fully funded may depend more on growth, making cash’s low return a different kind of risk. A close deadline still limits the ability to absorb losses.¹⁵

Vanguard’s framework finds cash more plausible for shorter horizons, lower risk tolerances and well-funded goals. The factors are considered together, so being behind on a goal does not by itself make taking more investment risk an answer.¹⁵

Income affects the balance too. Steady earnings may cover bills without investment sales; uneven earnings make that less certain.¹⁴ Money reserved for spending and money available for opportunities can therefore have different answers even within the same household.

The amount follows from the purpose

Cash reserved for spending is already committed. Cash held for opportunities carries a choice about how long to wait, what income it may earn and what gains elsewhere might be missed. Treating both as one investment position can hide that difference.

That helps explain the distance between Feldman’s emphasis on flexibility and Skousen’s preference for staying invested. Their views bring different costs into focus. The amount of cash that serves a particular portfolio depends on its spending dates, income, goal funding and capacity for loss, rather than one percentage that works for everyone.

Wealthion’s separate cash guide examines where cash can be held. This question comes first: how much of the balance is already needed for spending, and how much represents a decision to wait?¹⁶

Sources & Disclosure

¹ Securities and Exchange Commission, Investor.gov, Beginners’ Guide to Asset Allocation, Diversification, and Rebalancing; cash and cash equivalents, risk, time horizon and historical growth trade-offs. Accessed November 12, 2026. https://www.investor.gov/additional-resources/general-resources/publications-research/info-sheets/beginners-guide-asset ² Securities and Exchange Commission, Investor.gov, Cash Sweep Programs for Uninvested Cash in Your Investment Accounts, Investor Bulletin; differing cash-account yields, variable rates and balances that may earn no interest. Accessed November 12, 2026. https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins/cash-sweep-programs-uninvested-cash-your-investment-accounts-investor-bulletin ³ Steven Feldman, Steven Feldman on scarcity, debt and choosing real assets well, Wealthion; Learn article and associated video published October 30, 2026; interest income, Berkshire Hathaway, financial flexibility and a hypothetical retirement loss. https://www.wealthion.com/learn/steven-feldman-on-scarcity-debt-and-choosing-real-assets-well/ ⁴ Mark Skousen, Should I Sell My Stocks Now?, Wealthion; associated video published September 18, 2026; Learn article published September 24, 2026; his invested position and cash for special situations. https://www.wealthion.com/learn/should-i-sell-my-stocks-now-mark-skousen-says-no/ ⁵ Jonathan Wellum, Why Is the National Debt a Problem?, Wealthion; associated video published September 21, 2026; one- and two-year bonds matched to expected cash outlays. https://www.wealthion.com/learn/why-is-the-national-debt-a-problem-jonathan-wellum/ ⁶ Peter M. Ruberton, Joe Gladstone and Sonja Lyubomirsky, How Your Bank Balance Buys Happiness: The Importance of Cash on Hand to Life Satisfaction, Emotion, 2016, 16(5), 575–580; observational study of 585 United Kingdom bank customers. https://api.repository.cam.ac.uk/server/api/core/bitstreams/9bf21afd-f313-48ca-8233-c22ccc130961/content ⁷ Federal Reserve, Selected Interest Rates (Daily), H.15, released November 10, 2026; three-month constant-maturity yield quoted on an investment basis, November 9, 2026: 4.24%. https://www.federalreserve.gov/releases/h15/ ⁸ Federal Reserve, Market Yield on United States Treasury Securities at Three-Month Constant Maturity, Quoted on an Investment Basis, daily series DGS3MO, via the Federal Reserve Bank of St. Louis; September 1, 1981 to November 9, 2026. The series includes 17.01% on September 1, 1981 and 0.00% observations in later years. https://fred.stlouisfed.org/data/DGS3MO ⁹ Bureau of Labor Statistics, Consumer Price Index, June 2022, released July 13, 2022; annual all-items consumer inflation of 9.1%. https://www.bls.gov/news.release/archives/cpi_07132022.htm ¹⁰ Federal Reserve, monthly three-month Treasury constant-maturity yield, investment basis, series GS3M, via the Federal Reserve Bank of St. Louis; June 2022 average of 1.54%. https://fred.stlouisfed.org/data/GS3M ¹¹ Bureau of Labor Statistics, Consumer Price Index, September 2026, released October 14, 2026; annual all-items consumer inflation of 3.7%. https://www.bls.gov/news.release/archives/cpi_10142026.htm ¹² Bureau of Labor Statistics, Consumer Price Index, October 2026, released November 10, 2026; annual comparisons are unavailable for indexes with missing October 2025 data. https://www.bls.gov/news.release/archives/cpi_11102026.htm ¹³ Elroy Dimson, Paul Marsh and Mike Staunton, UBS Global Investment Returns Yearbook 2026, public summary, released March 3, 2026, Figure 12, printed page 7; annualized real returns on United States Treasury bills of 0.5% and equities of 6.6%, 1900–2025, DMS Database 2026. https://www.ubs.com/content/dam/assets/wm/static/cio/documents/giry2026-summary-public.pdf ¹⁴ U.S. Bank, What percentage of cash should be in my portfolio?, undated; attributed 2%–10% rule of thumb, personal circumstances and earnings stability. Accessed November 12, 2026. https://www.usbank.com/investing/financial-perspectives/investing-insights/percentage-of-cash-in-my-portfolio.html ¹⁵ Roger A. Aliaga-Díaz, Anatoly Shtekhman, Garrett Harbron, Daniel Jacobs and Warwick Bloore, A framework for allocating to cash: Risk, horizon, and funding level, Vanguard research, April 2024; goal-specific framework, funding level including planned contributions, and conditional model findings. https://corporate.vanguard.com/content/dam/corp/research/pdf/a_framework_for_allocating_to_cash.pdf ¹⁶ Wealthion, Where to Put Cash as Yields Move: A 2026 Guide, September 11, 2026; separate explainer on cash-holding options. https://www.wealthion.com/learn/where-to-put-cash-as-yields-move-a-2026-guide/

Wealthion is a dba of Greylock Peak Investments, a registered investment adviser. This article is general information only. It is not investment advice or an offer or solicitation, and it is not tailored to your circumstances. Guests’ views are their own and may not reflect those of Wealthion. Wealthion has not verified guest statements, including any performance figures. Investing involves risk, including loss of principal, and past performance does not guarantee future results. Wealthion refers readers to other registered investment advisers and shares in the fees they receive from referred clients, which creates a conflict of interest. Please see our Form ADV Part 2A and consult your own financial advisor before investing.