Gregg Wolper of Morningstar asks if funds should be allowed to go to cash.
“Many of the funds that have held up the best during this brutal market have one thing in common: cash,” he says.
“[T]he reason it catches one’s eye is that most funds aren’t allowed to take that course,” he adds. “Most stock-fund managers are required by their firm to be fully invested, or fairly close to it, at all times. Now is an opportune time to ask: Is that a good idea?”
When markets are rising, investors go for fully-invested funds, but in hard times, the issue gets murky, Wolper says. Dedicated advisors know their clients’ situation better than a fund manager, he says, and are better qualified to handle asset allocation.