Skrainka's definition of cash goes well beyond what some of us call walking around money. It includes bank accounts, money market accounts, six-month certificates of deposit and Treasury bills. For working investors, cash savings should typically be three to six months salary after taxes. But some people hold a lot more cash. While such individuals are a rarity, he says it's not unusual to find investors with 30 percent to 40 percent of their assets in cash and that money is in checking accounts or passbook accounts that pay little or no interest.
Some investors keep cash in every bank in town in an effort to spread their risk.
While this sounds like a good idea, there are more advantages in keeping your cash in one place. For starters, there's consolidated tax reporting and a lot fewer statements coming in the mail. In addition, an investor has a greater ability to take advantage of automatic programs such as systematic investing. Compare yields and quality. Don't become a rate hopper or someone who is constantly moving money from bank to bank in search of an extra quarter percent.