Personal Finance

I'm 35 with a $3.3 million net worth but a third of it is in cash - how should I deploy it in 2025?

John Seetoo

Published: January 20, 2025 10:00 am

24/7 Wall Street Key Points

• Amassing a sizable portfolio for a F.I.R.E. strategy can pose dilemmas if one is concerned about overweighting in a single investment, like an S&P 500 ETF.
• The changing economic landscape may create opportunities in 2025, a sentiment shared by Warren Buffett, who is keeping his largest cash reserve on hand in the history of Berkshire Hathaway. 
• Someone who has already enacted a diversification strategy might do well to maintain it if that delivers the peace of mind to avoid sleepless nights of worry over a portfolio.
• Emergency and Contingency savings for both immediate and long term plans are prudent considerations for portfolio inclusion planning. 
• Retiring early is possible, and may be easier than you think. Click here now to see if you’re ahead, or behind. ^(Sponsor)

F.I.R.E. (Financial Independence Retire Early) strategies have grown in popularity, especially with Millennials and members of Gen-Z. By aggressively saving and investing while observing thrift and meticulous spending discipline, more and more F.I.R.E. adherents are reaching their retirement nest egg targets at an early enough age to realize their goals. 

A sizable percentage of F.I.R.E. fans work in technology or other sectors where stock compensation growth can markedly accelerate their portfolio growth agendas. However, the risks of riding the growth in a single asset are high, and the law of averages leans in favor of diversification. While dumping a large allocation into a single S&P 500 Index ETF is a very popular tactic, it is not a one-size-fits-all option. For those holding cash in 2025, there are a number of changes in the coming economic landscape that may create huge opportunities where a combination of liquidity and timing can be potentially very lucrative.

If It’s Good For Warren Buffett…

Warren Buffett is unequivocally one of the world’s most famous investors. His decades of savvy stock and private equity investments into other companies has made him a role model for emulation by many smaller investors.  Starting in mid-2024, Buffett began liquidating millions of shares of Bank of America and Apple stock, after making high profits in both. Although he still retains relatively large stakes, Buffett is now keeping powder dry on an estimated $325 billion in cash. The logic behind this move is that Buffett sees the prospect of new, high potential opportunities in 2025 and wants to keep liquid so he can get in fast and while the window is available. The incoming Trump Administration’s policies towards A.I., energy, and domestic economic growth will likely see many new policies and players to watch in 2025. 

A 35- year old Reddit poster with F.I.R.E. aspirations has apparently followed Buffett’s move. Either by intent or by coincidence, he currently has a $3.3 million net worth and has $1 million of it essentially in cash (CDs with a 4.5% APY). He was soliciting suggestions for investment allocation ideas for 2025, with diversification as a priority motivation. 

He and his 32-year old wife both work in technology startups. They have 2 children under 5, live in San Francisco, have $500,000 at 3.2% remaining on their mortgage, and earn a combined $500,000 in annual salary plus stock bonuses (pre-IPO). 

Their  portfolio details are as follows:

• $600,000 in  401-K + 529 accounts 
• $400,000 in Stocks (index funds)
• $200,000 in Cryptocurrencies
• $150,000 in Venture Capital
• $150,000 in Bonds
• $800,000 Real Estate Home Equity ($500,000 mortgage remaining)
• 1 million in cash, CDs

Deciding Where To Put The Money…

As anticipated, quite a few respondents’ advice was to do lump sum investing into an S&P 500 Index Fund or dollar cost average monthly into it if there were concerns over volatility. However, there were a few who conceded that if having diversification already allocated allowed less worries, then the poster was on the right track, although he might miss out on some extra compounded growth by staying in cash.  Some additional considerations came to mind as well:

• No HSA – The poster had no Health Saving Accounts listed for either himself or his wife. Assuming that their respective 401-Ks have employer matching contributions, long term or emergency healthcare funds with pre-tax earnings can be a huge benefit, especially since their children are still young and of pre-school age. 
• HYSA – As the $1 million cash can be looked upon as both an emergency fund for 12 months’ expenses as well as available liquidity for other opportunities, a High Yield Savings Account earning over 5.0% APY might be another option to assess. HYSAs are FDIC insured up to $250,000 per account and have the instant liquidity of a standard savings and checking account without the penalties of early liquidation that CDs often contain. 
• A.I. Related Investments – As the poster and his wife both work in the tech industry, they are likely in the loop with regard to A.I. developments in their industry. Investments in companies with strong A.I. related prospects, either directly as in the Magnificent 7 tech stocks, or indirectly through data centers, equipment suppliers of copper data cables, etc. or utility companies supplying electricity to run A.I. are all potential high-growth areas.