Increasing cash positions

[bigfan188]

I know exactly how you feel. I have gone mostly to CD's and other cash vehicles. Retiring next month. Who knows how long this health and financial nightmare is going to last.

Me too. Feel the same Had 1.4 m in stock out of 3.2NW.( cash/bonds 600k and 1.2m in Real Estate which includes 2 paid off rental properties). :; NW Down to 2.9m- was looking to retire at year end but this haircut is making me rethink.- maybe work 6- 12 more months. Saving 15k a month (includes rental income) between wife and I so would like to make some of that back. Sold half stock portfolio.
I have turned real bearish and cant stand 3 to 5% daily moves.
If I was 40 my thought process would be different.

57 and wife 53- good luck

 

[Montecfo]

Don't pull the goalie, and don't take the offense off the field

Mixing sports analogies for sure. I have been reading everyone's comments with great interest. In my opinion, best is to stick with AA. Emotional selling or buying is not advised. Can't "pull the goalie" by excessive buying with defensive cash and ST bonds. Also can't "take the offense off the field" by excessive flight to cash.

I retired less than a year ago. During the financial crisis, as company CFO and trustee of 401k employees asked me frequently what to do. I simply said I was not selling but talk to your advisor etc see what is right for you.

One of our board members confessed to selling at the bottom and going to bonds. He is a very smart guy and I found his admission ahocking. In my opinion, he permanently lost capital by doing so. He also predicted, incorrectly, that rampant inflation due to stimulus would make his TIPs pay off. That may have been good insurance but I bet he is disappointed with his overall results.

Admittedly it is harder when you are retired. You are no longer accumulating in a lowered market, and do not have work as distraction. Stakes higher in that way.

Just my opinions, thanks to everyone as I appreciate the robust exchange of views

 

[Huston55]

At a time like this one, everyone needs to have and follow a plan that’s suited to their own circumstances and risk tolerance. However, I’m surprised that more of us are not discussing our “Backup Plans” and how we’re implementing (or preparing to implement) them. Maybe that discussion is in another thread, and I’ve just not seen it. [Note to Admins: Pls paste this post to a more appropriate thread if that’s the case.]

Here is my “Backup Plan” from my “Investment Policy Statement” (circa Dec 2014). It’s remained essentially unchanged since then. For reference, I FIREd in 2014 and my AA is 60/40 as it has been since then; I do not plan to change that other than rebalancing into it.

8. Back-up Plans:
A. Use cash buffer
B. Cut expenses: Have three budgets (optimum, median & bare bones) & cut expenses as willing/able
C. Do consulting work
D. Buy a single premium fixed annuity to help cover "essential" expenses. Use Fullmer's "annuitization hurdle" concept or Otar's "zone" concept to guide any annuity purchases.

My current status on implementing this plan is as follows:
A. I have 2yrs +/- of cash-ish positions and do not plan to increase it. I will consume it as necessary.
B. I am still adhering to my “optimum” budget, but will transition to a “median” budget this Summer if necessary. For me, that means doing less travel & less expensive travel.
C. I still do a small bit of consulting and would try to increase it before going to a “Bare Bones” budget.
D. This step is a last resort for me, and would be based on the status of my total portfolio.

I’m not implying that this plan is right for everyone, but it works for my situation and risk tolerance. Despite that, I am still wary of the near term and what it might do to my FI. So, I’m worried just like others. What I am saying though is that everyone should have such a plan...for times exactly like these.

 

[audreyh1]

That plan was already created years ago when I contemplated how my %remaining portfolio withdrawal could theoretically face a gradual drop to 50% in inflation-adjusted income. That’s why I tend to have a lot of cash on hand in short-term funds.

In the meantime my spending has already been cut for me as I can’t travel for leisure at the moment and probably not this year.

 

[Sunset]

Mine is:

1. Use cash buffer along with whatever dividends are paid.
2. Reduce expenses, no more/less luxury travel.
3. Sign up for SS.
4. Eat rice and beans.

 

[Toocold]

Use cash buffer along with whatever dividends are paid.
Reduce expenses, no more/less luxury travel.
Sign up for SS.
Eat rice and beans.

5) go back to w*rk?

 

[pb4uski]

5) go back to w*rk?

NFW.

 

[Dtail]

NFW.

+1

 

[aja8888]

5) go back to w*rk?

Can't...no one wants me anymore!

 

[razztazz]

5) go back to w*rk?

I think this post should be reported

 

[REWahoo]

5)[-] go back to w*rk?[/-] Sell a kidney.

FIFY

 

[neihn]

I am current paying $755 per month for my HD health plan. It is hard to swallow in this situation -

5) going back to work is a real for me.

 

[NW-Bound]

5) [-]go back to w*rk?[/-] Sell a kidney.

FIFY

Who wants a geezer's kidney, probably full of stones and cysts? Perhaps another geezer.

But the price has to be right, like $2.

 

[Jerry1]

5) go back to w*rk?

NFW.

+1

I think this post should be reported

As I’ve said in this or maybe another post, that’s beyond the last option. That’s not until survival mode kicks in. Also, at 60, where I’m at, work would be difficult to find. At 70, your options are very slim.

You can also see in this current scenario that in many cases, when the economy is in trouble, jobs are hard to come by - as in they’re letting people go. And sorry for being smug, but I can’t see me going from a high level management position to working in the trenches. I would rather eat rice and beans. Don’t get me wrong, I’m a firm believer that all work is honorable, but I also know myself and it wouldn’t be something I’d do unless it was the difference in eating/roof over my head or not having those things.

 

[mchisam]

Horrible time to increase cash position. I have been buying while stocks are on sale. Does anyone really think we wont be up 30% from our market low?

 

[jldavid47]

Trust me, I am down over 800K(OUCH !) but still buying.

Everybody has an "uncle" point. You have yet to find yours.

 

[jldavid47]

My benchmark has never been the S&P500 or some AA 60/40, 75/25 etc on a by-and-hold basis. My benchmark is simply "Do I have enough money."

Mine as well. It keeps my risk under control and keeps me from getting greedy. Also keeps me out of the nightmare scenario of having to sell assets to live as they depreciate in value. I know someone who ended up in that nightmare scenario during the 2000-2002 bear market. 100% invested in NASDAQ stocks as they plunged 80% had had to sell a some each month for living expenses. That math doesn't work. He had more than enough and got greedy.

 

[aja8888]

Horrible time to increase cash position. I have been buying while stocks are on sale. Does anyone really think we wont be up 30% from our market low?

I don't think the "final markdown" prices have been posted yet. I feel we have a few more months until that happens. 2nd quarter earnings reports will be evidence.

 

[audreyh1]

Horrible time to increase cash position. I have been buying while stocks are on sale. Does anyone really think we wont be up 30% from our market low?

When? LOL!

We came into this with a way overbought market. So I’m not so sure of a quick recovery. Not to mention we very probably aren’t done going down as we have serious headwinds ahead.

But I already had a large cash position because that’s how I’m always positioned.

 

[targatom2019]

Horrible time to increase cash position. I have been buying while stocks are on sale. Does anyone really think we wont be up 30% from our market low?

+1
Every thing looks good 10+ years from now. Isn't this why we invest in the first place ?

 

[Born2Fish]

I understand Brokrken's opinion which is: "My only point is that if you plan to buy back in, why not just wait it out. Timing the market rarely works out well. There have been plenty of articles written about the global financial crisis and how much money you would have lost if you only missed the best 5 or 10 days of the recovery."

I have long thought this way. But my wife and I face retirement in May one of three scenarios would occur: 1) lose a lot of $ in the market this year thereby risking near-term retirement ; 2) a safe well funded more conservative/moderate retirement; or 3) attempt fat-fire moving to a very expensive/posh area.

With the market dropping we figured we better ensure retirement type #2 and admit retirement type #3 most likely an unrealistic reach at this point. #1 situation- potentially having to continue working because we lost too much $ is to horrible to think about.

Still could get back into the market. Who knows, it may work out well. Otherwise eventually getting back in to market helps hedge against inflation- hopefully. But I realize we will probably miss biggest gains. We rather miss the biggest gains but not have to work any longer vs potentially losing a lot, with potentially a slow market recovery, and having to work or forever or have a skinny retirement.

Hopefully this point of view makes sense.

Makes sense to me.

I was terrified that the bottom would fall out and prevent me from retiring in the next year.

I have been moving from 45/55 AA toward 25/75 since very early on in the drop. Almost there. Down 12% now.

 

[trumpeting_angel]

In a fluke, I had $35K in cash inside my IRA. I was consolidating old 403(b)s and the Vanguard website was being temperamental.

When the sh*t began to hit the fan, I began buying both equities and bonds (Vanguard index funds). I have about $13K left in cash, and have paused buying at the moment. I expect a lower downturn, and while I generally would not consider timing the market, I needed to do something with that cash besides bloat my bond allocation further.

Technically I should have only bought stocks, I guess. But my pre-meltdown AA was not terribly conservative, and I didn’t want to return to it. Hoping I can buy some more low, and ride out this first year of retirement with my two+ years of cash and part-time work.

 

[donheff]

Horrible time to increase cash position. I have been buying while stocks are on sale. Does anyone really think we wont be up 30% from our market low?

I'm not sure I understand this. Sure - don't sell equities when then are down, But I liquidated some bonds recently to increase cash on hand. We don't know where this market is going but, in light of massive unemployment and negatively impacted business sectors, there could be a prolonged recession or depression. Cash is potentially king if things get extremely bad. I made a few moderate equity purchases during drops in February when many of us were still eating out and travelling. I had decided to move from 60/40 to 65/35 and saw those drops as opportunities. When whole sectors closed down and people were directed to stay at home, I concluded that those purchases were likely premature. With the recent bounce I'm at 65/35 so I plan to rebalance into equities if we get the major drop I fear. If we are lucky I may never get the opportunity. In the meantime, I am glad to have the additional cash cushion I set aside.

 

[Badger]

I was already about 45% cash (MM and CD) a few months before this whole mess started with about 15% Bonds and 40% Stock. So only down about 7.8% from market high. I would have less stock if it wouldn't mean more taxes from capital gain but I would not have sold while they were dropping either. There is enough in cash to see me through a couple of decades if I have that long. In the meantime I have a couple of buys in the works IF those stocks drop enough to the low offer I have established. I doubt if I will ever access any of the stocks so they will be for the children's inheritance.


Cheers!

 

[pb4uski]

.... I would have less stock if it wouldn't mean more taxes from capital gain ....

I had enough headroom in the 0% LTCG tax bracket to pare down stocks with no capital gains tax impact... but in exchange I had to forgo any Roth conversion for 2020... but I decided that with the uncertainty with respect to stocks that it was a worthwhile trade. Only time will tell if it was a wise decision.