Anyone in All Cash?

[Hamlet]

True enough.

Since we are in full accumulation mode, though, we are always buying steadily. We bought plenty during the dip (at the time it sure felt like too much ).

I was 90/10 and went to about 95/5 when the markets plummeted in early 2009. Downside to holding too much in equities is that you can't buy as much on the dips.

I'm now at 80/20. If the markets drop again, I have more cash available to buy equities.

 

[walkinwood]

...I would be very interested in reading about the assest allocation of all cash positions..../QUOTE]

Are you asking about allocation to checking, savings, mmf, cds, tax exempt mmf? That may be all the choices you have.

Not something I would do.

 

[antmary]

Thanks to the Bogleheads, we are invested 50/50 (after 1 year living expenses in cash):

Roth IRAs:
50% Intermediate treasuries
50% TIPS

Stocks:
60% Total Stock Market
40% FTSE All World ex-US

This is after having the one year's living expenses in laddered CD's. Too bad we missed out on those great rates a couple of years ago. Our mistake was to just have the cash in a 3 month CD, that kept rolling over - because we were building a house.

When all is said and done, we will have income from Social Security and rental property. I love to invest, and after maintaining our prudent reserve (one year's living expenses), we will continue to dollar cost average.

I think that an important aspect is to have an investing plan, and stick with it. I read The Boglehead's Guide to Investing about three times before I decided which way to go. I have read The Four Pillars..., but, have to continue to comb through it. Bill Bernstein is brilliant, and it will typically take a few readings for me to get it!

 

[Khan]

Cash, stocks, bonds, gold, paid for house.

 

[mickeyd]

I have been exploring the possibility of going all cash, even though I am years away from early retirement.

Unless you happen to have a huge amount of wealth and can tolerate zero risk, I would not recommend 100% cash. Inflation, though low today, will be back soon...

 

[skyvue]

With interest rates at historic lows why would anybody want to be in all cash? I could undertstand if rates were at like 10% on CD's and money market accounts but at 1.5 or 2% your not even keeping up with inflation.

 

[haha]

I would not recommend 100% cash. Inflation, though low today, will be back soon...

Trouble is, owning stocks may not help. Check the 1972-1982 S&P performance, during the biggest sustained USA inflation of the 20th century. On the other hand, stocks performed magnificently during the 1990s, a period of very low inflation. Hate to see a beautiful theory destroyed by ugly data.

Fluorescent Dreams Wax Cylinders - Economics: S&P 500 v. unemployment...

 

[oldtrig]

Have a large amount in 5 year Cd's. I purchased these in September 07 yielding 5%. I own commercial real estate but not sure about that. I have a retirement fund. When the Cd's are due I do not have a clue what I will do with the money. I might just go to Vegas and put it on red or blue

 

[bubba]

Years to go before retired, and I don't think we dare risk all cash. Growth is critical if we are to ever retire, and CD rates are just too low. Maybe having 70% in stocks is too risky, but we didn't start planning early enough to be able to just stash $ in the passbook account and ever be able to retire. Perhaps if I was very wealthy I would go into strict preservation mode, but for now, I have to hope for growth.

 

[novaman]

I went 33% bonds and the rest cash back in September when the dow was at 9800. This was from a 75% stock 25% bond allocation. I'm only 46 and not planning on retiring any time soon but I'm feeling like things aren't going to be good and what we've been seeing of late is nothing more than an aberration caused by the government artificially propping the markets up.

 

[brewer12345]

Stocks, bonds, commodities, foreign bonds, merger arb funds, warrants/options, cash, CDs, and most anything else I can find. Have been aggressively paying down my mortgage, wich may or may not translate as anything to do with the portfolio.

 

[mickeyd]

I went 33% bonds and the rest cash back in September when the dow was at 9800. This was from a 75% stock 25% bond allocation.

Wow, that's quite a change in AA. What prompted you to make such a change?

 

[emi guy]

I think that I will take the suggestion to read "Four Pillars" as my interest to go "all cash" is prompted by all the bad news I read and hear about the future of the U.S. & world economy. As "Novaman" expressed, the markets seem to be gyrating based on market manipulation by the various federal stimulus programs rather than normal corporate growth. Seem like our society is going through a fundamental shift in it's desire to consume and that it could forever change the growth track of companies. I know the experts of the world suggest ignoring the "noise" of the media but for the life of me, I don't see a way out of all this deficit spending, debt and unfunded liability mess other than masssive growth in the private sector. Yet, consumers, the private sector, don't seem to be reacting accordingly.
That said, and based on reading the replies to my OP, I guess cash would only make things worse. I feel like my options are cash or roll the dice that things will return to the way they use to be. BTW - I'm currently 60/40 (stocks/bonds) at 51 Years old. -Cataman

 

[John Galt III]

After the dot com crash of a few years ago, I moved about 90 percent of my retirement money into cd's and "stable value" funds. The stable value funds are an amalgamation of all sorts of things, but are indeed "stable" to the outside observer, yielding a low but predictable percentage, currently 3.5 percent per year.

I have the other 10 percent in IBM and AT&T, and just watch them go up and down, get the dividends, and don't worry about it.

 

[ziggy29]

For me, getting completely out of debt (including a paid-off house) means that we don't have to take nearly as much market risk since it significantly reduces the amount of income we'll need to draw from our portfolio in retirement.

Our current AA is increasingly (over time) being set to seek a mix of modest growth through some equities, income through investment-grade bonds and high-dividend stocks, capital preservation through some cash equivalents and inflation protection with TIPS, precious metals and other commodities.

Actually, come to think of it -- it's starting to sound more and more like the Permanent Portfolio, though that was somewhat unintentional.

 

[Onward]

my interest to go "all cash" is prompted by all the bad news I read and hear about the future of the U.S. & world economy

emi guy, unless you're the first person on earth to hear the bad news, the markets have already adjusted to take it into account. The bad news, or at least the consensus of what it will be, is already built into the prices of stocks and bonds. So you won't benefit by investing, or not investing, according to the bad news you expect.

Not everybody looks at markets this way, but I definitely do.

 

[Danmar]

Currently about 10% cash and 90% equities. I view my pension which starts in 2 1/2 years as a fixed income stream. Hence don't think I need a fixed income allocation. What does the board think of this idea? Haven't read much in the literature about this idea.

 

[Jay_Gatsby]

Sitting on about 40% cash right now. Dribbled a little into the market over the past year or so, but kept a fair amount of powder dry for stock/mutual fund purchases when opportunities arise.

 

[SecondCor521]

7 month emergency fund is about 2/3 cash, 1/3 S&P500.
Retirement funds are 100% S&P500 as they have been for the past ~20 years.
Kids' college are a mixture of S&P500 and target-age 529's.
Extra things include a small equity stake in my previous employer and some options from my current high-tech employer.

2Cor521

 

[Meadbh]

Currently about 10% cash and 90% equities. I view my pension which starts in 2 1/2 years as a fixed income stream. Hence don't think I need a fixed income allocation. What does the board think of this idea? Haven't read much in the literature about this idea.

I concur. A pension from one of Canada's big banks would be about the most stable sources of income around. I too would consider that "fixed income" if I had it. Moshe Milevsky ("Are you a stock or a bond?") would definitely consider you a bond.

OTOH I have no such pension and I include a significant chunk of FI in my portfolio, mostly in my RRSP. I am going to include some real return bonds. I am also focusing on dividend stocks.

 

[Alan]

Currently about 10% cash and 90% equities. I view my pension which starts in 2 1/2 years as a fixed income stream. Hence don't think I need a fixed income allocation. What does the board think of this idea? Haven't read much in the literature about this idea.

I agree with you. If your pension covers all your income needs then 90% equities is probably quite reasonable if you are happy enough with the swings in the market.

 

[ziggy29]

Currently about 10% cash and 90% equities. I view my pension which starts in 2 1/2 years as a fixed income stream. Hence don't think I need a fixed income allocation. What does the board think of this idea? Haven't read much in the literature about this idea.

Many people consider the "cash value" of their pension as fixed income within their allocation, which can work fine. If the pension is large enough that you need to tap little or none of your retirement portfolio for income, your allocation to equities might be limited only by your stomach for risk. You are in the situation of being *able* to take risks if you are comfortable with it, but not in a great need to take a lot of risk.

 

[Spanky]

Sitting on about 40% cash right now. Dribbled a little into the market over the past year or so, but kept a fair amount of powder dry for stock/mutual fund purchases when opportunities arise.

I thought that we have too much in cash (~26%).

 

[novaman]

Wow, that's quite a change in AA. What prompted you to make such a change?

All the bad news and fear. I also happened upon Harry Dent's latest book on the coming economic collapse and that just did it for me. It was probably a knee jerk reaction to the other extreme. We shall see. I'm still not sure I want to get back into equities just yet.

 

[emi guy]

emi guy, unless you're the first person on earth to hear the bad news, the markets have already adjusted to take it into account. The bad news, or at least the consensus of what it will be, is already built into the prices of stocks and bonds. So you won't benefit by investing, or not investing....

The way I see it is that there are two camps; the doom and gloom camp that thinks that all this deficit spending and national debt will bankrupt our economy and the other side that acts like this is a somewhat normal business cycle that will correct itself eventually. The market cannot price both predictions into itself.....

I think it depends on which camp ends up being right.

When the market crashed last year, the market seemed to be caught completely off guard evidenced the fact that it fell so far, so quickly.

I'm sure that in time, things will be fine but at 51 with hopes for an early retirement, I'm not sure I can wait that long. If only my crystal ball were not on the fritz!