Cash Position

[eytonxav]

Cash also represents dry powder, very nice to have if there is a big downturn.

 

[Dd852]

Total cash =8%. Cash plus bonds= 10 years of expenses


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[Fermion]

Horrible right now. I am at 20% cash and the market is not cooperating (crashing). We sold our house this year and I was mostly out of internet range during Brexit, not that I would have gone all in if I had been in range. The minute I put this 20% to work, the market is going to drop 30%.

I don't even have 15% of the cash doing anything. 0.02% in checking account.

 

[Backdraft57]

I just retired two months ago. Due to some payouts and such I have 67% cash. That's crazy I know but the market is 122% of GDP and PE is through the roof. I really don't know what to do. I suppose wait for a pull back? Any suggestions? I suppose I could DCA into something or just wait a bit.


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[COcheesehead]

I just retired two months ago. Due to some payouts and such I have 67% cash. That's crazy I know but the market is 122% of GDP and PE is through the roof. I really don't know what to do. I suppose wait for a pull back? Any suggestions? I suppose I could DCA into something or just wait a bit.


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Create the AA that fits your needs and start working the plan. DCA into equities, ladder into bonds and buy some alternatives like GLD or REITs. Bonds just as easily right now can go to 1% or less providing a nice TOTAL return even from these levels.
Every time I get cash I rebalance to my original plan. I thought the market was high 2 years ago. It has served me well to just hold my nose and keep sticking to the plan.

 

[Lsbcal]

When I rebalanced recently I bought Vfsux, short term investment grade. Not cash but not too far off. SEC yield is 1.6%. Not sexy.

FWIW Bill Gross recently mentioned short term IG as a decent alternative.

 

[mrfeh]

Create the AA that fits your needs and start working the plan.

+1

Stop trying to time the market.

 

[nash031]

I think I'm way up to ~3% cash now. Mostly looking for opportunities, not hedging against a crash or anything. Usually at 1% or less.

 

[FreeBear]

Cash is an extremely useful diversifier. There is also the psychological benefit of having short term expenses covered while you leave most of your invested funds exposed to market ups and downs, making it possible to stay invested in the face of events like 2008.

+1 Exactly!

We hold 10-12% cash plus another 40% in bonds. Helps us sleep better. We've been retired over a year now. During the accumulation phase, I held almost no cash and was 80-90% equities for decades.

 

[sengsational]

If I categorize the 401k guaranteed income fund as "bonds", then I'm rocking between 2% and 4%. If I say the GI is cash, then I look foolish, but it's had at least a 3.6% yield for the last 7 years. And I kind of hate bonds right now...2008 taught me they're too correlated to equities if "everybody" flees to cash.

 

[sengsational]

Here's some reading that's related to this thread...kind of: Where Should I Invest Money Which I Will Need in a Year or Two? | Marotta On Money

 

[RHONDAVE]

I just retired two months ago. Due to some payouts and such I have 67% cash. That's crazy I know but the market is 122% of GDP and PE is through the roof. I really don't know what to do. I suppose wait for a pull back? Any suggestions? I suppose I could DCA into something or just wait a bit.


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I suggest since you just retired you read Money Magazine April 2016 - What steps are you taking to protect your portfolio? article. I still hold a copy and have access to it. Just part of the article suggests AA 0f 30/70 to start and shows what would have happened during the '07-'09 Bear, '87 Crash, '73-'74 Bear and losses of low single digits. Reverse the allocation to 70/30 during those time periods and losses of 20% occur.
I am going to sit on 41% cash right now because I would never be able to recover once we quit our jobs.

 

[COcheesehead]

I suggest since you just retired you read Money Magazine April 2016 - What steps are you taking to protect your portfolio? article. I still hold a copy and have access to it. Just part of the article suggests AA 0f 30/70 to start and shows what would have happened during the '07-'09 Bear, '87 Crash, '73-'74 Bear and losses of low single digits. Reverse the allocation to 70/30 during those time periods and losses of 20% occur.
I am going to sit on 41% cash right now because I would never be able to recover once we quit our jobs.

30/70? What happens if they raise rates a couple times? Just as possible, even more likely than a bear market.

 

[RHONDAVE]

Would you guys pull $30k out of market for 90 days to earn $400 on new checking deal?

Another bank is offering $15K for 30 days and bonus is also $400. PM me for name of promotion.

 

[RHONDAVE]

30/70? What happens if they raise rates a couple times? Just as possible, even more likely than a bear market.

The article was written and based on past performance of market with 3 different allocations. Investing has risk factors and does not represent future returns.

 

[Another Reader]

I do not take investing "advice" from Money magazine. I probably know as much or more than most of their contributors, and I'm no expert.

70 percent bonds will kill you if/when interest rates rise.

Citi is pushing that $400 bonus to the Costco customers. It pops up every time I sign in.

I do not necessarily think you are wrong in holding cash, given you are planning a large house purchase as part of your move. Any money you need in the next couple of years should be in cash, CD's or something similar.

 

[RHONDAVE]

If I categorize the 401k guaranteed income fund as "bonds", then I'm rocking between 2% and 4%. If I say the GI is cash, then I look foolish, but it's had at least a 3.6% yield for the last 7 years. And I kind of hate bonds right now...2008 taught me they're too correlated to equities if "everybody" flees to cash.

How do I categorize my 401K guaranteed 5% defined plan? It is guaranteed 5% annual forever plus dividends possible. I don't mind calling it cash @ 5+ %.

 

[pb4uski]

.....70 percent bonds will kill you if/when interest rates rise. ....

Not if you hold until maturity or hold low duration bonds. I have a couple 2020 target maturity bond ETFs that have duration in the 3.5-4.3 range... if rates go up they may decline in value but will recover by 2020. No sweat.

Thanks to a generous amount of PenFed 3% CDs (hope they renew later this year) my weighted average duration is 2.9 and weighted average yield is 2.65% so Dr. Yellen, bring it on!

 

[Lsbcal]

30/70? What happens if they raise rates a couple times? Just as possible, even more likely than a bear market.

Bonds would work out OK if rate rise is gradual, like 2 increases of 0.25 points per year. Over a few years or duration of bonds.

Happened in 2004 to 2006. On the other hand in 1994 rates went up a lot faster and it was a year of pain. Turn the other way in1995.

 

[eytonxav]

30/70? What happens if they raise rates a couple times? Just as possible, even more likely than a bear market.

The stock market isn't a real fan of raising rates either, especially if it a rapid rise.

 

[Mulligan]

I dont even have enough cash to cover my health deductible. But I have a drawer full of 0% access checks they send daily... Cant afford to keep cash laying around when I am busy stealing 6-7% dividends from sleep at night utility preferreds...


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[VFK57]

Bonds would work out OK if rate rise is gradual, like 2 increases of 0.25 points per year. Over a few years or duration of bonds.

Happened in 2004 to 2006. On the other hand in 1994 rates went up a lot faster and it was a year of pain. Turn the other way in1995.

Unless the Feds forced by higher than average inflation, I do no think we will see any rase this year.

 

[Loving Life]

Well, I have slowly been accumulating cash for the past few years - I am sitting on about 70% cash/bonds/stable value funds - I retired in 2013, but I took a contract job overseas.

What I am worrying about is how the world has become mad/crazy. Look around the world, China expansion, ( I currently live in SE Asia) bombing/Killing everywhere. Shooting in the US, bombings in Europe, Mid-East, heck Bombs in Thailand yesterday.
The Market is going UP, while Corp revenues are down, lots of employment if you can live on $10 a hour job that's being created. Government regulation is killing us, more Business are shutting down than being created. How am I suppose to look at Investing rationally in a Irrational and Mad world.

 

[Backdraft57]

Well, I have slowly been accumulating cash for the past few years - I am sitting on about 70% cash/bonds/stable value funds - I retired in 2013, but I took a contract job overseas.

What I am worrying about is how the world has become mad/crazy. Look around the world, China expansion, ( I currently live in SE Asia) bombing/Killing everywhere. Shooting in the US, bombings in Europe, Mid-East, heck Bombs in Thailand yesterday.
The Market is going UP, while Corp revenues are down, lots of employment if you can live on $10 a hour job that's being created. Government regulation is killing us, more Business are shutting down than being created. How am I suppose to look at Investing rationally in a Irrational and Mad world.

I am having the same thoughts.

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[urn2bfree]

I have about 3 years of withdrawals -half in CD's earning about 2.5% and half in a Credit union getting about 1%. I am debating whether I ought to pay off remainder of mortgage before the ARM adjusts up in about 3 years. It would take about a third of my cash position to do it. Our current rate is pretty low (2.75%) and our state and federal marginal tax rate makes the "cost" of keeping the mortgage come in twice as high as the Credit Union interest earned but not a huge amount on a dollar basis.

I am unsure which way to proceed:

1)Payoff Mortgage Now- "costs" less than carrying mortgage, peace of mind, avoid ARM adjustment in 3 years-- but loss of flexibility if the market crashes or rates jump up.

2) Wait with option to pay off smaller amount in 3 years when the ARM adjusts - flexible in the interim but is costing me a little money now to maintain flexibility.

3)buy a 3 year CD. Which would pretty much equal the "cost" of my mortgage- reduces flexibility but a less so than sinking the money in an illiquid house asset. (Also technically the ARM adjustment will start a few months before the CD term ends...)

You all are smart, what do you think?


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