If you’re copying or following my Active Portfolio, you might have noticed by now that I’ve made a few exits recently and I’ve gone cash heavy. Under the current market conditions, overall sentiment, and directions of economic indicators, I see it as extremely unwise to not have cash on the side. Current cash position: nearly 39%

It is very important to note that I’m doing this only with this portfolio, which is my “active” portfolio. I do not change the initial amount I’ve put in often and it is mostly for trading rather than investing, unlike my other long-term portfolios, which I add to on a monthly basis, and they’re pure investments with no trading.

Back to “why” I’m cash heavy. Markets look like they’re entering another consolidation phase, as sentiment is very undecided. While parts of the economy may be starting to open up and look bright, they’re still not 100% sure if they’re going to be back at full capacity soon, especially with increasing virus cases once again. On the other hand, vaccination programmes are underway, but no one is sure when this will mean that the world reopens.

On a more micro level, companies are all under pressure, albeit maybe for different reasons. With a rather unusual time in 2020 and first half of 2021, managements have tried different ways to ensure their companies either benefited from the situation or minimise any negative impact. This meant that some have gone through some drastic measures, that some shareholders might not have liked very much; case in point is what just happened this morning with GSK.

So, with all the uncertainty, one almost certain thing is that we could be seeing some panic selling in some names that will come down and I need to be ready to pick them up, or existing holdings coming down and I can improve my entry price (I’ve done this a couple of times already these past 2-3 weeks).

Under current conditions, I see that the general market conditions have about 30% impact on asset prices, the sector/industry has 40%, and the actual asset dynamics account for about 30% of the overall price.

Finally, out of the cash position, I’m always keeping around 15% of the portfolio for short-term leveraged trading, so the actual cash available for investing or swing trading is actually around 24%. I’m more than happy to answer any questions you may have.

Have a great and profitable month!

Hassan

(Written by Hassan Afifi)

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Please note that we do not provide any financial or investment advice. All the material shown here is for educational purposes only, and we only mention the author’s own personal opinion and approach for such educational purposes. If you would like to invest or trade, we urge you to do your own research and to seek professional advice from qualified investment advisors.

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