Income from cash...where to invest?

[Mulligan]

Obviously, any type of guaranteed rate will be very low. It seems like, I have read on many forums that the term "when rates return to their normal level" is used concerning these measurements such as government bonds and CD's. I wonder if maybe this assumption is wrong and perhaps we will have to live with these rates for at least 10 years? Japan's 10 year bond has been extremely low for over 10 years and they have had similar problems we have had economically. Is it realistically possible we are just going to have to deal with this for an extended period of time such as a decade?

 

[NYEXPAT]

or 2?

 

[clifp]

or 2?

or 3 decades as all the baby boomers retire.

 

[arebelspy]

or 3 decades as all the baby boomers retire.

Seriously. I was reading a financial book last weekend written in 99, and it was talking about 2010 being the first year the baby boomers are retiring and expecting the market to be bad for awhile after that due to them selling to withdraw from their retirement accounts, and I thought man, if it is supposed to be bad for the next five years due to this recession, plus the wonderful baby boomer retirements on top of it... yikes. Hold on to your hats, will be a fun few decades.

 

[Hamlet]

I'm buying equities as fast as the money comes in.

But I have a pretty high tolerance for fluctuation.

I am essentially 100% equities beyond my emergency fund. I haven't exactly enjoyed the last few years, but it didn't keep me awake at night.

Anyway, here's my question: where are you guys putting cash these days?

 

[GregLee]

I am essentially 100% equities beyond my emergency fund.

I'm 95.5% equities. I don't have an emergency fund; with pension money coming in and good credit, I don't see the need. I don't like keeping cash.

 

[brewer12345]

I'm 95.5% equities. I don't have an emergency fund; with pension money coming in and good credit, I don't see the need. I don't like keeping cash.

I keep a large e-fund, but I also view it as a substantial portion of my fixed income allocation. Having I bonds and CDs as part of the mix is not a bad thing, although one gives up the possibility for capital gains.

 

[Mulligan]

I'm 95.5% equities. I don't have an emergency fund; with pension money coming in and good credit, I don't see the need. I don't like keeping cash.

That's why I enjoy reading comments for other ideas. Greg, you and I are exactly the same as far a having a good pension with plenty of incoming cash flow. However, you treat your capital exactly the opposite that I do. I have my excess in CD's and now moving up into the high flying investment world of I Bonds. I did start adding $300 a month into the Vanguard total stock index last year, to force myself into equities. I'm definitely not criticizing or even necessarily happy with what I am doing, though. If memory serves me, you said you are in your 60's, I am in my 40's. The humor I find in it is a traditional financial planner might say we should switch portfolios

 

[Alan]

That's why I enjoy reading comments for other ideas. Greg, you and I are exactly the same as far a having a good pension with plenty of incoming cash flow. However, you treat your capital exactly the opposite that I do. I have my excess in CD's and now moving up into the high flying investment world of I Bonds. I did start adding $300 a month into the Vanguard total stock index last year, to force myself into equities. I'm definitely not criticizing or even necessarily happy with what I am doing, though. If memory serves me, you said you are in your 60's, I am in my 40's. The humor I find in it is a traditional financial planner might say we should switch portfolios

I think this is why an individual's risk tolerance is so important in financial planning. Greg has a secure pension and knows that if the worst happens he should always have that, so he feels confident to have a very high equity ratio.

I also have have pensions but they are non-COLA and only covered 70% of post-retirement expenses when we ER'ed at age 55. My (our) personal risk tolerance means we have only 35% in equities with a lot of dividend producing funds to avoid, hopefully, having to sell off equities to meet our needs. Our e-fund will soon be 100% I-bonds after the last 2 of our 5% CD's mature in December. Our "cash" buffer is the VG short term bond fund that we tap from time to time through the year, and into which the quarterly and annual fund distributions go.

 

[GregLee]

If memory serves me, you said you are in your 60's, I am in my 40's. The humor I find in it is a traditional financial planner might say we should switch portfolios

I'm almost 70. That advice from a financial planner only makes sense, in my view, when an older person is nearing the time when he must start spending down his investments. Volatility is no problem if you won't have to sell stocks for a while (and I don't think I'll have to). I keep mostly stocks because I dislike the idea of losing out on profits just as much as I dislike market losses. An investment mistake is when you wind up with less money than you would have had, had you not made the mistake.

 

[Mulligan]

I think this is why an individual's risk tolerance is so important in financial planning. Greg has a secure pension and knows that if the worst happens he should always have that, so he feels confident to have a very high equity ratio.

I also have have pensions but they are non-COLA and only covered 70% of post-retirement expenses when we ER'ed at age 55. My (our) personal risk tolerance means we have only 35% in equities with a lot of dividend producing funds to avoid, hopefully, having to sell off equities to meet our needs. Our e-fund will soon be 100% I-bonds after the last 2 of our 5% CD's mature in December. Our "cash" buffer is the VG short term bond fund that we tap from time to time through the year, and into which the quarterly and annual fund distributions go.

Alan, have you been in retirement long enough to notice the effect of inflation, in relation to its effect on the amount of your non COLA pension coverage of your monthly budget? My pension has been reduced to a light version before I even received my first COLA this January. So long term, I may need to plan better for it.