Author Topic: How much cash vs. investment?  (Read 1961 times)

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Offline ThirtySomethingWEquity

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How much cash vs. investment?
« on: July 02, 2021, 11:59:02 AM »
I'm curious how much you guys/gals carry in cash in checking/savings (relative to your overall stash or general income).

For a long time I always kept ~100k or so in plain ol' cash (stupid, i know) because I had variable income due to contract work and that seemd like a magic comfort number.    At one point I realized I had a car loan and a bunch of cash not doing anything so I paid off my car loan.

Meanwhile my stock investments have gone crazy the last few years.  How aggressive is everyone in terms of investing vs. parking cash in a money market or CD or something that won't have the possibility of tanking.

Last year we probably had 20% of our non RE net worth in various cash or cash equivalents.  Now I'm thinking of all the $$$ I missed out on looking at the stock market.  Thoughts?

Offline lnc

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Re: How much cash vs. investment?
« Reply #1 on: July 02, 2021, 02:33:21 PM »
Keep $100k in cash is not stupid.  One need some cash cushions for emergency, opportunity to invest when stock market crashed, or just make one feel financial secure and sleep better at night.

In order to keep at least 6 months worth of expenses as emergency fund cushions, that can easily reach $100k especially for people live in the high living expense, affluent area like Irvine.  So $100k in cash is really not too much. 

I like to keep somewhere between 10% to 20% in cash depends on the market condition.  When market is at the top like right now, I would gradually sold some stocks and raise cash to around 20%.  When the market is down significantly, transfer cash to stocks and reduce cash holding to about 10%. 





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Offline The California Court Company

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Re: How much cash vs. investment?
« Reply #2 on: July 02, 2021, 08:01:17 PM »
$100k? lol
We were stupid keeping 10x that much in cash, spread over 4 bank accounts. Too bad market crash never came.
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Offline ChiKid24

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Re: How much cash vs. investment?
« Reply #3 on: July 02, 2021, 11:18:12 PM »

I like to keep somewhere between 10% to 20% in cash depends on the market condition.  When market is at the top like right now, I would gradually sold some stocks and raise cash to around 20%.  When the market is down significantly, transfer cash to stocks and reduce cash holding to about 10%.

We all know the historical long term growth of the market. This means it's often hitting new all time highs. So trying to time the market this way isn't typically a winning proposition. Last year alone the S&P hit an all time high 33 times. Did you sell down your stocks and move to cash then? Or even worse, did you do that on one of the 23 record highs hit in 2019? If so, you'd still be sitting on your cash and missed a huge runup the last 2,3,4 years.

Nothing wrong with sitting on cash for emergency fund or potential upcoming needs like a house down payment. I'm actually trying to grow my cash position in the coming years so I don't need to solely rely on stocks during early retirement years. But don't hold it to wait for a buying opportunity in stocks. Today's all time high could be next years 52-week low, and you've missed the buying opportunity.

Offline aquabliss

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Re: How much cash vs. investment?
« Reply #4 on: July 03, 2021, 12:41:13 AM »
It’s always difficult to move your cash to Market index funds at all time high, but believe me it’s just as hard when the market drops 30%+ because you always feel like it’s going lower. 

Just keep 6mo in cash and put the rest in total market or index fund.  For many years I split my Roth into cash and S&P fund, then in 2014 I just went all in S&P and I remember very clearly I thought it was stupid to do this at all time highs in 2014.

I also use to hold Vanguard Wellesley and Wellington funds (blended bonds/cash/stocks) but those underperformed as well so just changed to S&P fund and things are much better.

Eventually this party will come to and end, could be this year or 10 years from now.  Market timing such an event is futile and impossible, just don’t sell when the 50% drop comes and you’ll be fine.

Offline lnc

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Re: How much cash vs. investment?
« Reply #5 on: July 03, 2021, 07:21:15 AM »
Yes, timing the market is hard and that’s why I only do that on small portions of my portfolio and hold majority long term. 

And we all human, really hard not to sold some of high flying stock at when it went up significantly to realize some profit and buy some at the dip.  I consider this small portion of my portfolio as playing money, my gambling fund for stock market. 
« Last Edit: July 03, 2021, 07:30:21 AM by lnc »

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Re: How much cash vs. investment?
« Reply #6 on: July 03, 2021, 10:16:46 AM »
I'm curious how much you guys/gals carry in cash in checking/savings (relative to your overall stash or general income).

For a long time I always kept ~100k or so in plain ol' cash (stupid, i know) because I had variable income due to contract work and that seemd like a magic comfort number.    At one point I realized I had a car loan and a bunch of cash not doing anything so I paid off my car loan.

Meanwhile my stock investments have gone crazy the last few years.  How aggressive is everyone in terms of investing vs. parking cash in a money market or CD or something that won't have the possibility of tanking.

Last year we probably had 20% of our non RE net worth in various cash or cash equivalents.  Now I'm thinking of all the $$$ I missed out on looking at the stock market.  Thoughts?

You missed the stock train.
You can use the term possibly tanking in many things.
Everything is a risk.
(Not investment advice. Please consult your investment advisor)
« Last Edit: July 03, 2021, 10:27:11 AM by eyephone »

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Re: How much cash vs. investment?
« Reply #7 on: July 03, 2021, 03:07:43 PM »
How about invest all of your liquid funds in a margin account and keep some nominal amount of cash in a bank account?  With a margin account, you can always pull out the cash you need in an emergency without having to sell any investments.
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Offline sleepy5136

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Re: How much cash vs. investment?
« Reply #8 on: July 05, 2021, 12:22:28 PM »
Having an emergency fund for 6 months generally is enough. How much that looks like is different from household to household. If 100k is 6 months of emergency funds for you then that is completely fine. If not, I’d look to putting more funds into the market and in RE.

As for me it’s 60% stocks, 30% RE, and 10% cash. Cash is trash.

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Re: How much cash vs. investment?
« Reply #9 on: July 05, 2021, 10:28:00 PM »
How about invest all of your liquid funds in a margin account and keep some nominal amount of cash in a bank account?  With a margin account, you can always pull out the cash you need in an emergency without having to sell any investments.

Putting all money in cash is feeding the banks as they make money from the deposits.
Expensive cars are not a good way to spend your money. Unless you can deduct it as a business expense.

Offline nosuchreality

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Re: How much cash vs. investment?
« Reply #10 on: July 06, 2021, 08:04:01 AM »
How about invest all of your liquid funds in a margin account and keep some nominal amount of cash in a bank account?  With a margin account, you can always pull out the cash you need in an emergency without having to sell any investments.

Planning on margin suffers from the same fears as selling and overall fears during market downturns.  If I remember during the last economic hiccup correctly, margin requirements tighten way up and the rates spiked up too.  Even at present, you're looking at an 8% loan on balances over $100K, higher if less.

Expensive money, far better to sell a loser or eminent loser from the portfolio and use the cash.

If you've got the stomach, great, but in general, pile on debt when you hit an emergency isn't the best advice.

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Re: How much cash vs. investment?
« Reply #11 on: July 06, 2021, 08:21:15 AM »
Having an emergency fund for 6 months generally is enough. How much that looks like is different from household to household. If 100k is 6 months of emergency funds for you then that is completely fine. If not, I’d look to putting more funds into the market and in RE.

As for me it’s 60% stocks, 30% RE, and 10% cash. Cash is trash.

Yup. The key is save and make the money grow.

Offline momopi

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Re: How much cash vs. investment?
« Reply #12 on: July 06, 2021, 09:32:09 AM »
I'm curious how much you guys/gals carry in cash in checking/savings (relative to your overall stash or general income).
For a long time I always kept ~100k or so in plain ol' cash (stupid, i know) because I had variable income due to contract work and that seemed like a magic comfort number.    At one point I realized I had a car loan and a bunch of cash not doing anything so I paid off my car loan.
Meanwhile my stock investments have gone crazy the last few years.  How aggressive is everyone in terms of investing vs. parking cash in a money market or CD or something that won't have the possibility of tanking.
Last year we probably had 20% of our non RE net worth in various cash or cash equivalents.  Now I'm thinking of all the $$$ I missed out on looking at the stock market.  Thoughts?

First, I would caution against posting about large sums kept in your bank account on public forum.  Like it or not large amounts of personal info is already avail on the web, so be careful about what you post online.

Second, hindsight is always 20-20 and someone else is always a genius.  If you kept your money in cash, someone else will have invested their money in Tesla stocks last year with 1000% returns making you look stupid.  And if you had invested your money in stocks last year, chances are you may have bought a lemon or sold too early, while someone else made a different financial decision that makes you look stupid.  Don't go down this road in your thinking.

You need to decide for yourself how much you need in cash reserve vs what you can put in stocks.  Even if you invested in S&P index there is a risk that the market may crash and not recover to previous level for many years.  But putting your cash in "safe" CD's with ultra low returns while inflation eats away at your money's purchasing power is also a losing position.


Offline ThirtySomethingWEquity

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Re: How much cash vs. investment?
« Reply #13 on: July 06, 2021, 10:15:57 AM »
How about invest all of your liquid funds in a margin account and keep some nominal amount of cash in a bank account?  With a margin account, you can always pull out the cash you need in an emergency without having to sell any investments.

Planning on margin suffers from the same fears as selling and overall fears during market downturns.  If I remember during the last economic hiccup correctly, margin requirements tighten way up and the rates spiked up too.  Even at present, you're looking at an 8% loan on balances over $100K, higher if less.

Expensive money, far better to sell a loser or eminent loser from the portfolio and use the cash.

If you've got the stomach, great, but in general, pile on debt when you hit an emergency isn't the best advice.

I think Martin means you invest all the cash but *not* trade on margin, then if you need cash you withdraw while trading on margin, that shouldn't cost 8% right? 

Offline ThirtySomethingWEquity

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Re: How much cash vs. investment?
« Reply #14 on: July 06, 2021, 10:18:26 AM »

First, I would caution against posting about large sums kept in your bank account on public forum.  Like it or not large amounts of personal info is already avail on the web, so be careful about what you post online.

Eh the only person here who has any idea of who I am is Martin and he already has my SSN and saw most of my financial info already  ;D

You need to decide for yourself how much you need in cash reserve vs what you can put in stocks.  Even if you invested in S&P index there is a risk that the market may crash and not recover to previous level for many years.  But putting your cash in "safe" CD's with ultra low returns while inflation eats away at your money's purchasing power is also a losing position.

Good point, nothing is certain.  I just wanted to guage if I was less conservative or more so in terms of liquid funds.

 

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