Clients should be wary about holding hefty amounts of cash, according to Goldman Sachs leaders Amal Alibair, Brittany Boals Moeller, and Matt Weir, who spoke about portfolio planning at Goldman Sachs Private Wealth Management’s At the Helm conference.
“When you have cash in your portfolio, one of the things you have to think about is inflation,” says Alibair. “You have to think about that eroding into your cash, and reducing your purchasing power.”
Weir adds that while cash may currently look attractive given high short-term rates, clients might be better-served by buying long-term bonds. “Given our expectations that the Fed will be cutting rates, we think locking in higher rates today is a smart idea for clients’ portfolios,” he says.
But in terms of hedging against inflation specifically, Boals Moeller points out that stocks could be the best bet. “Every time you think about inflation, we hear about all these different asset classes – but equities is actually the one that’s proven to be the most durable,” she says.
Speaking about how to get that cash into the market, Weir advises a strategy of buying bit by bit. “We always advise tranching in gradually, especially for clients who are investing big sums of money for the first time. And when we get inevitable pullbacks of 5% to 10% or more, accelerate the tranching process to enter the market at more favorable prices.”
Weir adds that he likes calendar-based plans. “Oftentimes we’re scheduling the tranches on the first of the month,” he says. “And that’s very intentional, because we’re trying to remove the emotional element which so often leads into poor investment decisions.”
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