Help - 6 month Liquidity needs and strategic asset allocation cash weight

E

elite708

New member
Joined
Jun 18, 2026
Messages
0
Reaction score
0
I am having issues and keep messing this up.
If the problem states that the individual wants to hold 6 month of cash as reserves, this % is held in cash as part of the SAA. (but not deducted from the asset base)
If the IPS has liquidity requirements of paying off credit card debt, buying house (near term liquidity need which are deducted from the asst base).. Are these also kept in cash as part of the SAA?? Dont we deduct these from the SAA, put the PV of the liquidiyt needs in cash, and invest the REST? thus the SAA ignores this liquidity need?
 
Known liability = keep as cash and remove from SAA. Think of immediately due mortgage payment, replacing a roof in 6 months, major car repairs duye soon etc. If you invested this amount and lost it (for whatever reason) the result would be catastrophic for the investor.
Unknown liability but desire liquidity ‘just in case’ your car explodes in your garage = Keep in liquid investments (short term treasury, commercial paper etc) include in SAA.
 
You must log in or register to reply here.
Back
Top