Keep some assets liquid, planners say

NEW YORK – Cash. Bread. Dough. Ducats. No matter what you call it, the money you manage to sock away over time is symbolic of past successes and future hopes. So, in a sideways market choked by risk, should you preserve more of your hard-earned dollars in their most liquid form?

Most financial planners agree that cash should account for some portion of your total holdings at all times, preferably in a money market account yielding 2 percent a year. It mitigates volatility, helps cover expenses and may lend you peace of mind. How much cash you set aside depends on the rest of your portfolio, your time horizon and your appetite for risk.

For professional investors, timing plays a role as well. With interest rates rising and the market snarled by uncertainty over everything from inflation, Iraq, the presidential election and concerns about equity valuations, a number of money managers are raising their cash stakes.

The Investment Policy Committee of Standard & Poor’s recommended last month that investors boost the cash portion of their portfolios to 30 percent and reduce stock exposure to 60 percent. The previous recommendation had been to keep 20 percent in cash and 70 percent in equities.