During the 2008-2009 financial crisis, approximately 1 out of 7 millionaire households liquidated 20% or more of their portfolios. The rest either stayed the course, refusing to part with their acquired assets at firesale prices or recognized the bargains that existed and bought more.
How is this possible? There are quite a few causes, and one of them is cash.
Compared to the middle and upper class, millionaire households have the liquidity to endure crises at an extremely high level.
In fact, devotion to high cash balances is one of the few major differences between households of professionals and entrepreneurs.
In the Brookings white paper “The Wealthy Hand-to-Mouth”, author Greg Kaplan points out that an astounding 83% of professionals earning salaries between $85,000 and $215,000 have less than one month’s cash available. The rest is spent or invested. The advantage is that money gets put to work and started compounding … Read the rest of this article!