3 Reasons Billionaires Like Cuban and Buffett Prefer Holding Cash
If you regularly tune in to the blogs, podcasts and videos of popular personal finance influencers, you'll hear a lot of advice they all seem to agree upon. One area of overlap is that you should invest a certain portion of your income.
While this is solid financial advice, those with billions of dollars, including entrepreneurs like Warren Buffett and Mark Cuban, think a large portion of your portfolio should be in cash. Here are some of the reasons why.
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1. Financial Opportunities
When it comes to investing, few can match the accomplishments of former Berkshire Hathaway CEO Warren Buffett. Over the years, he made a name for himself as a top investor who preached patience and holding for the long term. However, Buffett doesn't just invest; he also holds a lot of cash.
The strategy of having cash on hand gave Buffett the upper hand in terms of flexibility. When a stock's price dipped and he determined it undervalued, other companies might not have had the liquidity to buy it up on the spot. However, Buffett's cash reserve allowed him to jump at the chance and maximize his profits.
Not everyone runs a multinational conglomerate like Berkshire Hathaway, but holding cash can still give you the chance to take advantage of opportunities that may arise. Whether it's an undervalued stock, a property or a rare watch, if you have enough cash on hand, you won't need to rush to sell any other investments to acquire it.
2. Market Volatility
Buying low and selling high may be the most common investing advice out there. However, market volatility isn't always great. Cuban, a successful entrepreneur, investor and TV personality, always keeps a large portion of his portfolio in cash because, whether it be political unpredictability, a global event or a new innovation, he isn't a fan of losing money and doesn't want to take big risks.
In January 2025, Nvidia's stock dropped 17% -- the largest plunge for a U.S. company in history at the time. While the company quickly rebounded, Cuban didn't feel right about buying in, as he thought there was still too much uncertainty. Other market-shaking events, such as President Donald Trump's tariff announcements, have also kept Cuban from investing. By keeping his money in cash, he's been unaffected by the market swings and can stay confident about preserving his wealth.
3. Emergencies
There are also reasons to keep a lump sum of cash available that don't involve investing, such as building up an emergency fund.
Rachel Cruze, a personal finance expert and co-host of the popular "Ramsey Show," is a big proponent of saving enough to cover three to six months' worth of expenses in case something terrible happens. If you get laid off, face a medical emergency or have your car break down, you'll be happy you built up that emergency fund.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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