---
title: "Why should we try to maintain two layers of cash in our positions?"
type: "Topics"
locale: "en"
url: "https://longbridge.com/en/topics/31138509.md"
description: "In Graham's "The Intelligent Investor," it is suggested that investors limit their stock investments to between 25% and 75% of their funds and take countermeasures based on market trends. I didn't take it seriously a few months ago—since I entered the stock market, of course, the goal is to make money. Keeping money idle means it won't appreciate. If the author believes the stock market will rise in the long term, why not go all in for potentially higher returns? Could the author be mistaken? Book knowledge alone feels shallow. After this period, especially under the guidance of 'Google Sensei,' I've come to understand a bit. After all, Graham is a master; of course, he knows that money in the stock market appreciates..."
datetime: "2025-06-25T16:05:55.000Z"
locales:
  - [en](https://longbridge.com/en/topics/31138509.md)
  - [zh-CN](https://longbridge.com/zh-CN/topics/31138509.md)
  - [zh-HK](https://longbridge.com/zh-HK/topics/31138509.md)
author: "[龟派投资](https://longbridge.com/en/profiles/16154980.md)"
---

# Why should we try to maintain two layers of cash in our positions?

In Graham's "The Intelligent Investor," it is suggested that investors limit their stock investments to between 25% and 75% of their funds and adjust their positions inversely based on market movements.

Initially, I didn’t take it seriously—after all, entering the stock market is about making money, so why leave funds idle if they won’t appreciate? If the author believes the market will rise long-term, why not go all-in for higher returns? Was the author mistaken?

But theory alone is shallow. After some time, especially under the guidance of my mentor, I’ve come to understand. Graham is a master for a reason. He knows stocks appreciate over time, but holding cash accounts for market dynamics and investor psychology. In practice, cash serves at least three purposes:

### 1\. Emergency Funds for Buying the Dip

The stock market’s design ensures that buying the dip effectively lowers your average cost, accelerating recovery. In certain ranges, buying the dip can turn a loss into a profit, creating a clear contrast with holding stagnant positions.

### 2\. Day Trading to Expand Safety Margins

Following the first point, selling shares after a rebound—common in day trading—reduces per-share costs, enhancing safety margins and easing psychological pressure during downturns.

### 3\. Seizing New Opportunities

Whether it’s sudden setbacks in existing holdings, market shifts, or emerging industries, new opportunities constantly arise. Participation requires available funds for entry or swing trading.

For example, entering positions in Google and Apple was possible only because I had capital ready. Though profits are modest now, the low entry cost and diversification benefits are valuable.

Thus, even if selling during a rally seems like "missing out," don’t regret it—this cash isn’t meant for chasing gains. It’s not about how much a single trade could’ve made but about stepping back from the game to prepare for crises and opportunities.

Hospitals and fire stations are overlooked until needed. One well-timed dip buy or opportunity can boost profits, refine strategies, and expand an investor’s mindset. Flexibility and restraint lead to greater leaps—this is the holistic view.

### Why Two Tiers of Cash?

Too much drags returns; too little undermines effectiveness.

Generally, long-term investors aiming for steady gains allocate most funds to stocks, holding minimal cash to maximize returns. Limited cash forces careful evaluation of dip-buying and opportunities, encouraging patience and curbing reckless speculation.

### Related Stocks

- [GOOG.US](https://longbridge.com/en/quote/GOOG.US.md)
- [GOOGL.US](https://longbridge.com/en/quote/GOOGL.US.md)

## Comments (18)

- **阿里个多 · 2025-11-07T06:59:29.000Z**: Always fully invested and leveraged, can't control my hands, what to do
  - **龟派投资** (2025-11-07T07:22:34.000Z): Good question, I've been beaten several times too. My current solution is "rebalancing", controlling the position to a certain ratio. The rise and fall of stocks will inevitably cause changes 
  - **阿里个多** (2025-11-07T07:23:40.000Z): After a 30% profit this year, it just can't break through and keeps fluctuating between 30 and 40
  - **阿里个多** (2025-11-07T07:25:40.000Z): That is to say, for example, when the position reaches 70%, the proportion will increase after the rise, and then reduce to 70%. Conversely, after a decline, buy to replenish to 70%.?
- **北德交易员 · 2025-06-28T17:17:24.000Z**: That's how it is, especially with U.S. stocks, like the sharp drop in April. If you didn't have money to add to your position, wouldn't you be anxious?
- **KuKu · 2025-06-27T18:09:37.000Z**: What do you think about direct financing? A temporary leverage of 0.2 isn't much.
- **顾神与chatgtp · 2025-06-27T15:46:37.000Z**: I kept seven layers of cash
- **大通摩史丹利 · 2025-06-27T15:40:56.000Z**: Thanks for sharing, most people find it hard to achieve.
- **NewUser_HJKut7 · 2025-06-27T15:18:25.000Z**: What does 'two layers' of cash mean?
  - **NathanLeo** (2025-06-27T15:24:05.000Z): Success
- **Marphew · 2025-06-27T15:04:04.000Z**: Got it, well said! That 20% cash is for emergency use when necessary!
- **何以诚 · 2025-06-27T15:00:59.000Z · 👍 4**: Because I need to save money to buy an electric car
  - **佛山不养闲人** (2025-06-27T16:28:54.000Z): Food delivery
- **无限制星级格斗士 · 2025-06-25T17:12:47.000Z · 👍 9**: Recommending again $Schwab US Div Eq(SCHD.US)Extremely low volatility, with top-tier companies as the weighted stocks, giving you the thrill of investing in a stable ETF. The dividend yield is also stable, basically around 4%, and it will further increase dividends to balance the yield as the stock 
  - **水上漂_6bnXiv** (2025-06-26T08:37:29.000Z): Great insights and strategies, thank you for sharing, big shot.
  - **ChinaMan** (2025-06-27T15:07:40.000Z): Is this a good time to open a position at the current level?
  - **ChinaMan** (2025-06-27T15:07:53.000Z): Thanks for sharing
- **酥油饼幺二幺三八 · 2025-06-25T16:23:45.000Z**: Learning 🫡