Advisors may suggest keeping three months to six months of living expenses in cash during a client's working years.
"The worst thing you want to do is sell your wonderful investments while they are at bargain-basement prices," said Lineberger. For example, a portfolio with 50% stocks and 50% bonds may take 39 months to recover in a worst-case scenario, according to research from FinaMetrica. That's why Heller may suggest holding 24 months to 36 months in cash.
"Look at the cash as the security blanket that's allowing you to invest in the most incredible wealth-creating machine, which is stocks of wonderful companies," Lineberger said.While some advisors suggest retirees hold 12 months to 36 months of cash, others may recommend less liquidity.