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Old 10-08-2015, 10:42 PM   #21
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right now sitting on 11% cash as had a recent home sale and haven't moved that money anywhere given the market turmoil. Have another home for sale that will close in a month which will probably put me closer to 15% cash.


Live off interest and dividends so will probably DCA it into the market once I have a bit more comfort level on where things are going...can anyone tell me?


Like to be at about 5% cash just because I do!! Always looking for bargains in the market to take advantage of. Probably never slide below 5% so that I have a couple of years emergency fund for house, cars, etc sitting in cash.
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Old 10-09-2015, 03:01 AM   #22
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With CD and bonds earning near zero, I hold my "bond" portion of portfolio in cash these days.

85/15 AA.
FIREd

No guaranteed sources of income - No pension, no SS yet. Must Live off of withdraws and dividends.

I just like cash and the liquidity to help me sleep at night. If needed, that cash can get me through 3 years without having to liquidate any other holdings ..

As a total aside . I also keep 10 Benjamin's in my wallet at all times - it's amazing the leverage one can have when paying in cash. cash is king !
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Old 10-09-2015, 08:27 AM   #23
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Maybe I wasn't clear about the cash. Most mutual funds, if you look at a Morningstar breakout of a fund's actual holding, hold some cash. Sometimes 10% or more of the fund's assets are actually in cash. Bond funds for instance actually hold some cash. Stock funds also hold some cash to allow for redemptions or because they just don't see stocks that they believe are worth investing in. This cash has nothing to do with any cash balance in your account that you can direct to buy more shares. If I look at my overall portfolio, direct cash holdings - cd's, bank balances, money market funds - is about 4% of portfolio but if I run the portfolio through Morningstar X-ray, total cash is actually about 7%.
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Old 10-09-2015, 09:17 AM   #24
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Quote:
Originally Posted by marinauser View Post
Also, don't forget to take into account the cash held by any stock or bond funds that you own. This can impact your cash allocation although it isn't readily available as cash. If you are not careful, you can end up with an over allocation to cash. This may not be an issue for someone using only index funds.
I don't think what you suggest is a valid way to view your cash allocation.

Why would you count cash held by stock or bond funds that you own as cash?

You cash allocation is to provide your liquidity... cash held by funds you own to provide their liquidity doesn't count. The cash funds hold to provide for their liquidity is typically modest and any impact on return is a akin to a phantom fund expense.
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Old 10-09-2015, 09:39 AM   #25
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Differences of opinion are what makes the world interesting. But I would point out that if you want a 60-35-5 equity to bonds to cash asset mix and you are wondering why your performance is not what you expected, I would suggest that if the true split is really 57-33-10- then accounting for the cash held by mutual funds may well explain benchmark underperformance. I also think that if you want to compare your performance to a benchmark, then the benchmark needs to be as close as possible to your actual asset allocation, not some assumed allocation that is incorrect. Now, if all you own is a total stock market index fund, cash there is less than 1% and has less impact, but if you own Harbor International - a fairly popular international fund, its 3.5% cash holding may be important to your analysis. Or, for instance, Loomis Sayle Bond fund that was actually holding 16% cash in its more recent report. For the funds that some people hold, it may not make one bit of difference but for others, it could be significant.
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Old 10-09-2015, 11:09 AM   #26
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I don't disagree with what you said in terms of assessing portfolio performance but I do disagree in terms of assessing liquidity for funding living expenses.... which was the main point of this thread.

On your last post I agree... my benchmark is a mix of index funds that mimic my target AA and I compare the total return of that hypothetical portfolio with my actual portfolio returns. While those index funds probably carry a little cash for liquidity reasons so it had minimal impact on returns if I held managed funds that made a move to cash for tactical reasons then my returns would lag the benchmark.

One problem with looking through to the underlying fund liquidity is that it is typically only published at month or quarter ends and the percentage in cash may or may not be representative of the cash they carry over time so it is not a reliable. IOW, Loomis Sayle Bond's 16% might be a one-day thing and not indicative of the average cash they carried for the period as many funds window dress around reporting dates.
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Old 10-09-2015, 03:04 PM   #27
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I don't necessarily disagree with marinauser either, but if you own AAPL do you count the cash they have? They reported having over $200B in cash, with a market cap of $639B. I only saw those numbers at a glance and I'm not sure both are true or if they are valued the same way because Yahoo finance says just $34.68B in cash, but in any case it's a fairly to very significant amount. But just like Apple has that cash available to work with and make money on in some form, so does a fund manager, and it's also not cash that you or I could get our hands on.
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Old 10-09-2015, 03:07 PM   #28
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Like pb4uski I would not consider funds' cash as cash in AA but apparently marinauser doesn't agree, and that's OK. I just checked Vanguard Total Stock Market Index and saw it had -0.3% in short term reserves. See attachment. That was a surprise. The Vanguard Total Bond Market Index shows 0.7% in short term reserves. For me, this combination is almost 0% cash for these mutual funds.

Maybe actively managed funds keep significantly more reserves for withdrawals and opportunities? Enough to make a significant difference as suggested by post #25?
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Old 10-09-2015, 06:00 PM   #29
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% Cash in asset allocation

Quote:
Originally Posted by RunningBum View Post

The comment about holding 30+ months cash during a downturn (and I know you didn't say that was you) doesn't make sense though. In a downturn you would be putting cash back into the market unless you thought it was still going lower. Most likely this is a factor of illogical thinking, that when the market is down you are afraid of it and won't buy low, instead waiting for it to get higher before getting back in. Not a strategy to replicate. .
I think the 30 months cash is not for holding in a downturn, it is for spending in a downturn to avoid selling at a loss. If normally you are living on dividends interest and selling as needed to create an income stream, in a bad market -when both bonds and stocks could be down- having a cash fund to weather the storm is putting cash back in to the market...either because you are not selling when you otherwise would be, or even allowing you to reinvest dividends and cap gains that you might otherwise take out. In fact one can think of cash as a bond with a maturity of zero. It is a way to smooth volatility.



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Old 10-09-2015, 07:58 PM   #30
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Cash provides diversification in a portfolio. It behaves independently of other asset classes. When I researched asset allocation the cases I studied showed that a small cash allocation improved the risk-adjusted return of a stock and bond portfolio. This is why I hold cash as part of my AA. If you look at balanced portfolios offered by investment companies there is usually a % allocated to cash.

I keep cash for any other purpose separate from my portfolio.
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Old 10-10-2015, 05:59 AM   #31
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the reality is the true benefit of cash is protecting you if you are spending down only until the first up cycle .

after your first up cycle even spending down in good or bad markets does not matter much .

the extra gains without bonds and cash in an up market cushions you spending down in a bear market .


volatility is another story , not many of us want the volatility of 100% equity's but functionality wise cash buffers don't add much after your first decent up tick .
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Old 01-16-2016, 06:00 PM   #32
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I keep about 10% in cash, sleep well money, dont care about loss of return at this point.


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