Month of May 2010 so far has proven to be very depressing for usual investors. European debit crisis coupled with several other worldwide events such as BP oil spill, China’s announcement regarding potential pullback in European bonds, tension between North and South Korea, are taking a major toll on the market currently. Euro is trading at 4 year low level and DOW traded under 10,000 market after February.

Cash is an important position to keep in your portfolio. I usually maintain 20% cash. That helps me take advantage of last minute buying based on news and in sudden market crash etc. Given the age of automatic trading, cash becomes even more important. Everyone has stop sell orders set and if market starts to go down, all these orders trigger, and you can buy in bulk and be up 10-20% immediately.