Should You Be 100% Invested or 100% in Cash?

Mark Skousen

Mark Skousen, Ph. D., is a professional economist, investment expert, university professor, and author of more than 25 books.

“How many insecurities traded on Wall Street today?” — Franz Pick

“Owners of sound securities should never panic.” — J. Paul Getty

Last Friday at the Orlando MoneyShow, I debated market timer Mike Turner on the subject, “The Economist vs the Mathematician: Buy-and-Hold vs Market Timing.”

There couldn’t be a bigger difference between our two investment philosophies. Even though the market had just gone through a treacherous sell-off, I remained 100% invested in the markets, while he was almost completely in cash watching for the next trend.

Turner thinks he has discovered the Midas touch, knowing “exactly” (his word) when to get in and when to get out of the market. His technical system promises to avoid major bear markets and still take full advantage of bull markets. His sessions are always full because he plays on investors’ two greatest emotions, fear and greed.

Based on years of experience as an applied financial economist, I am highly skeptical of anyone who says he can predict the tops and bottoms of markets. The toughest challenge for any investor or money manager is to decide if a sell-off like the one we just went through is merely a correction or the beginning of a full-scale bear market.

Nobody wants to see their portfolio drop 50%, as it did in 2000-2003 and 2007-09 on Wall Street, or what happened with bitcoin in January. So, I can understand the appeal of Mike Turner’s message. Investors are always searching for easy answers.

The danger is that, at other times, you might be whipsawed and be in cash when the market suddenly soars. That’s what happened last Friday. If you were 100% in cash last week, you missed out on a huge market rally that started on Friday.

Exclusive  Make 38x What Your Bank Pays You -- Tax Free, Every Month

Risks in Trying to Time the Market

For years, market timers used the simple 200-day moving average to avoid a market crash or bear market. But the problem is that the moving average triggers too many buy-and-sell signals during bull markets. The University of Pennsylvania’s Wharton School Professor Jeremy Siegel, author of “Stocks for the Long Run,” tested the 200-day moving average on the Dow Jones Industrial Average (DJIA) since the 1980s. It barely avoided the crash on October 19, 1987, and the terrible 2007-09 bear market, but in 2010-2012, investors were whipsawed, switching in and out of markets, 20 times!

Granted, Mike Turner’s system is more sophisticated than a 200-day moving average, but Siegel’s study demonstrates the danger in such technical systems.

The Loser’s Game

Investment advisor Richard Bernstein did a study of individual investors’ buy-and-sell habits over a 20-year period from 1994 to 2014 and found that the average investor made only a 4% annual return on his portfolio, compared to 10% for the S&P 500 stock index. The average investor underperformed T-bills! You can see why Charles Ellis wrote a whole book about investing called “The Loser’s Game.” Why? Two reasons: 1. Investors tried to cherry-pick individual stocks. And 2. Investors tried to time the market.

My Best Strategy

Over the years, I’ve developed the safest way I know to maximize returns on your portfolio. Invest in fundamentally good companies (I prefer ones that are highly profitable and paying rising dividends), buy them when they are priced low, and hold through thick or thin. To protect yourself from severe bear markets and when an individual company starts losing money and falls in share price, use a generous protective stop around 25% below the current price.

Exclusive  This is the World’s Most Dangerous Tax

J. Paul Getty said it best: “The seasoned investor buys his stocks when they are priced low, holds them for the long-pull rise and takes in-between dips and slumps in stride.”

Or as Jesse Livermore advised, “Buy right, sit tight.” He learned the hard way. He was always tempted to be a market timer and, as a result, made and lost a fortune three times. He ended his career bankrupt.

Note: The quotations above are all found in my book, “The Maxims of Wall Street,” now in its 5th edition. It is a compilation of all the great sayings, proverbs and words of wisdom on investing. Alex Green calls it a classic, and the book has been endorsed by Warren Buffett, Jack Bogle, Dennis Gartman, Richard Band, Bert Dohmen and many others. Amazon sells it for $24.95, but you can order it directly from me for $20 for the first copy, and all additional copies are only $10 each. I autograph each one, and I pay the postage for domestic shipments. If you order a whole box of 32 copies, the cost is only $300 postpaid. They make a great gift. To order, call Harold at Ensign Publishing, toll-free 1-866-254-2057, or go to (Note: For orders from outside the United States, please call Harold for a quote, as additional mailing costs apply — all shipments outside the United States are via airmail.)

In case you missed it, I encourage you to read my e-letter article from last week about the three lessons that you could learn from last week’s stock market crash.

Like This Article?
Now Get Mark's FREE Special Report:
3 Dividend Plays with Sky-High Returns

This newly-released report by a top-20 living economist details three investments that are your best bets for income and appreciation for the rest of the year and beyond.

Get Access to the Report, 100% FREE

previous article

Exchange-traded fund (ETF) investing expert Jim Woods believes Valentine's Day can teach us valuable lessons about investing.


Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen publishes 5 different investment newsletter advisories, including the award-winning Forecasts & Strategies, which has beaten the market over the last 15 years.

Product Details


Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays. Bryan's four newsletter and trading services include:

Product Details


Jim Woods

A 20-plus-year veteran of the markets, Jim Woods has varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor.

Product Details


Bob Carlson

In Bob's monthly newsletter, Retirement Watch, he provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details


Mike Turner

Mike’s financial, mathematical, computer science and engineering background serves as the foundation for his disciplined, rules-based approach to trading. Mike’s three services include:

Product Details


Used by financial advisors and individual investors all over the world, is the premier provider and one-stop shop for dividend information and research.

Product Details

Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.