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“Cash is the King” in a Time of “Uncertainty”

Adani Institute of Digital Technology Management (AIDTM)

Dr. Darshan Ranpura
Assistant Professor at Adani Institute of Digital Technology Management


While money doesn’t grow on trees, it can grow when you save and invest wisely.

While on random talk with one of my friends who is in the business of FMCG, he pointed out how the continuous increase in commodity prices and geopolitical crisis leads to margin pressure on their business. So, when we discussed this scenario, he nicely pointed out one point rather than doing anything new in the time of “Uncertainty”, it’s better to sit tightly by withholding available “Cash”. Further, when I curiously asked holding cash will not have any “Yield”, then he said the point is true, but holding cash certainly gives me “Flexibility” in decision making when this dust will get settled down. This entire discussion leads me to the thought the same principle is applicable in the journey of investment. After all, one will have obviously asked the question how???

So, the answer to this is holding some proportion of cash in the portfolio will allow investors to buy more stock in the time of a market crash and this practice in investment dialect is known as “Dry Powder”. (Note: While I am writing this article Nifty50 is down by 2.65% on a closing basis, 19th May 2022). As of 2021, the Capgemini World Wealth report released found that people with at least $1 million in investable assets kept nearly 24% of their portfolio in cash. These cash reserves allow them to exploit interesting opportunities and buy value stocks at a lower price.

The world’s top investors know that holding enough amount of cash in the portfolio has multiple advantages. They know through first-hand experience how fragile is investing in the stock market and how it can drain down one’s wealth without warning. i.e., In August 2019, Warren Buffett and his firm Berkshire Hathaway held a record $122 billion in cash and the company used available cash to buy blue cheap stock during the Covid-19 blood bath in the market. Further, the latest report from the legendary Tweedy Browne Global Value Fund allocated around 13.82% of the fund’s holdings to cash, T-Bills, and money markets.

Though holding cash has its own advantage, it is once again a double-edged sword. if as an investor we are holding a significant proportion in cash and waiting to invest in a market at the right price, then there is a 100% chance we end up with nothing. Let me end this article with a point – “Cash itself is not risk-free”. If on the ideal cash if the investor earns less than the prevailing inflation rate, then this essentially means that the value of our money is falling over time.

Adani Institute of

APPLICATION FORM 2022

Digital Technology Management

Adani Institute of

APPLICATION FORM 2022

Digital Technology Management

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