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.”
This article is being provided for educational purposes only. The information contained in this article does not constitute a recommendation from any Goldman Sachs entity to the recipient, and Goldman Sachs is not providing any financial, economic, legal, investment, accounting, or tax advice through this article or to its recipient. Neither Goldman Sachs nor any of its affiliates makes any representation or warranty, express or implied, as to the accuracy or completeness of the statements or any information contained in this article and any liability therefore (including in respect of direct, indirect, or consequential loss or damage) is expressly disclaimed.
The Investment Strategy Group, part of the Asset & Wealth Management business (“AWM”) of GS, focuses on asset allocation strategy formation and market analysis for GS Wealth Management. Any information that references ISG, including their model portfolios, represents the views of ISG, is not financial research and is not a product of GS Global Investment Research and may vary significantly from views expressed by individual portfolio management teams within AWM, or other groups at GS.
Our weekly newsletter with insights and intelligence from across the firm
By submitting this information, you agree to receive marketing emails from Goldman Sachs and accept our privacy policy. You can opt-out at any time.