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A rule i recently set for myself is the higher the market, the more I sell and keep cash. The lower the market goes the more I buy.
There is no rule that says "You must keep 40% in cash". In fact it must be guided by the market trend: If the market tend to peak and could correct due to high valuation, if there is a (real) risk of recession or a crash, or on the contrary if the market is historicaly low or oversold.
I'd say the minimum of the minimum to keep in cash is 15% in absurdly oversold markets, 25% in normal time, 40% in high markets and 60% or more when you feel there is a real risk of correction.
Above 60% I consider that you are severly bearish on the whole market.
I also depends on what type of porftofio and on your strategies. If your portfolio is highly diversified and contains other safer securities, you can lower your cash minimum a bit.
If you bet on only 3 or 4 "deals of the year", all in the ame sector, then you better keep some money in a safe place.
If you track a few stocks that you know very well and trade the highs and the lows, then you will need 40~50% of cash all the time.
If you always seek the stocks best fit for a given moment in time and a given set of circumstances, shifting from one sector to another without being afraid to make radical changes in your portfolio, then the minimum is 20%.
It also depends on the gain or loss you do on your portofolio.
If you lose on many stocks, you better not to buy another stocks, but wait with your cash until you can average down 30, 50 or 90% cheaper.
Cash for the sake of it is useless but can be especialy useful for averaging down and scale trading.
HTH
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