It sounds like you have roughly 20 years of investments under your belt with 15-20 years left of working and investing. This is a time where even the most conservative allocation recommendation would likely still have you with nearly 80% of your long term investments sitting in equities.
If you deviate from this path too much you can throw all those long term investment average return numbers out the window and you are in uncharted waters. Sidling 2/3 of your long term investments in cash is slamming the breaks on the long term investment philosophy in favor of speculation.
We all want cash to invest in a crash. This is part of the beauty of recognizing that a crash is an opportunity. But don't let that opportunity lead you into the rocks and crash your ship.
The first reality I think we all have to accept is that the majority of people who will be made rich by the next crash will be people who were already wealthy. They make a lot because they have a lot of liquid cash to invest in a down period. But because they are wealthy the risk they are taking is minimal as the majority of their money was still held in their long term investments.
As much as we would all like to, most of us average Joes can't emulate their future success without taking a massive risk with our long term investments. Cashing out 2/3 of your investments I think qualifies as a major risk.
The best we can hope to do I think is emulate a small portion of a truly rich persons gains in that situation. First figure out how much of your investment money you could truly live with not growing over the next 10-20 years. I doubt you can afford to risk losing money on 2/3's of investments in the form of potentially permanently reducing that moneys potential growth.
- Consider sidelining a much smaller portion of your investments as an opportunity fund to reinvest in something you think is a major opportunity. Like they say, gamble with at most 10%. But the real number is what you can afford to not have invested.
- Consider investing a little less going forward and diverting more money to your liquid savings in CDs or higher interest accounts. Think of it as saving up to buy a fire sale home. Or plunk down $100k on some equities in a recession.
May doing some of those less drastic things will help you feel like you are positioning yourself to turn a crash into a net positive event for yourself. Emotionally I understand that appeal. Realistically we would probably all be better off investing as much as possible while holding just enough cash to keep our emergency fund sound and our checks from bouncing between pay periods.
If you don't need this money to retire. Then by all means speculate away. But keep in mind we could all be very wrong about where the market is going. Don't underestimate our ability to double the market before it tanks. Crashes are built into the long term investment strategy. Ride the wave. If you cash out now and stay out too long you may permanently diverge from the gains that were likely to be yours by sticking to the strategy you have done so well with over the last few decades.
In the words of Admiral Akbar
