Money market? What do you get, say 4-6 %, less tax, whilst inflation is 6.5 % Now that is a gauranttee way to lose your capital. I am not saying you must never have cash, but 20 % as a rule, means that you are gaurantteed to lose capital on 20 % of your portfolio. A cash position that large should just be an intrim position before going back into equities, but not a rule.
Some interesting advice here. I can only assume, Carrot, that you do not have a house bond which is why you have cash in hand? If you do have a bond, then it should be an access bond where you can deposit your cash and take it back out when you want to invest it. I agree with the advice that 5% is the maximum you should keep in real hard cash.
Cash is just paper and if you take inflation into account it has no value. I only keep cash give or take to half of the amount of the CFD's deposits in my trading account. The rest goes to my flexi bond but I have no problem maxing the bond if investment returns can outperform the interest.
The bottom line: ANY return on cash is better than no return at all, considering inflation. You can't afford to not have money work if the aim is long-term wealth creation. I keep 10% of my portfolio in cash, 70% in a low-to-medium risk, longer term equity portfolio and 20% for geared investments to supplement growth and take advantage of market anomalies. Recently I found an instant-access savings account with ABSA with a 4.5% to 5% interest rate and no admin costs. It's a great rate as far as banks go. It is good enough for me, and convenient. Its called the depositor plus account.