I keep separate accounts (CDs) for my cash/savings. My brokerage account is 100+% invested at almost all times. I read a lot and try to avoid the sectors I believe are in a slump or due for one (aka housing and banking for a while). My savings account is for safety and my brokerage account is for making money. I look for good stocks to sell options on in any market although some weeks I might not make a trade at all.
Diversify, but not to the point of watering down your gains from a good stock pick.
Right now I'm 198% invested, but then again I use options to lower my risk. So it's more accurate to say if all options I've sold were assigned I'd have 49% of my account on margin. All of my trades and account holdings are documented on my blog.
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My Trader’s Journal