Self-Directed Investors Hold a Lot of Cash. Maybe That’s Perfectly Rational

In this Morningstar market brief, it is revealed that the average self-directed Vanguard investor (7 million accounts!) held an asset allocation of 65% stocks, 24% cash, and 10% bonds. That’s a lot more cash than I expected as well.

Then this WSJ article comes up, Wealth Management Has a $3 Trillion Problem: Investors Are Keeping Too Much Cash (gift article). A self-directed investor and former pilot is profiled that keeps 85% in stocks and 15% in a “a money-market fund yielding 3.62%”, which suggests a Vanguard money market fund or another very-low cost money market.

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