How much cash do you have sitting on the sidelines?

[equakesfan]

I have about 2 years of expenses in cash about 2.5% of investable assets. I have some bonds/CDs that mature to replace the spending to keep it at 2 years but I'm planning of increasing it to 3 or more years of expenses. I don't have any significant cash on the sidelines at this moment

 

[COcheesehead]

I agree. Bond funds are not as "safe" as we were sold they'd be. Neither are individual bonds, The good ones get called in. The bad ones (Lehman) go broke.

You can hold a lot of cd's that pay less than bonds and still come out way ahead of holding bonds that get called in or go broke. Don't feel any safer that your bonds are going to get paid before stock holders. If your company goes broke your bond ain't worth much either.

I may be simple, but it if you want safe money put it in laddered CD's. If you have time to spare( 3,4 year plus.) Put it in stock index fund. Each year take some stock and feed your cd's. If stocks are down, you have a year or two to catch up.

A couple, three years income of cash in cd ladders works for me. I never think of percentages, I think of year's living expenses. 2-3 years worth makes me comfortable. Any more that that makes me feel like I might be missing out on stock market long term performance.

If your bonds are called away, you’ll are not buying the right kind of bonds.

 

[Beststash]

I just sold in May and went away - about 1.3M in CDs and MM. I do not trust anything about todays economic environment.
At almost age 75, I am comfortable not being in the market - first time since '76.

"Bulls get rich, Bears get rich but hogs get slaughtered"

 

[RetiredHappy]

I just sold in May and went away - about 1.3M in CDs and MM. I do not trust anything about todays economic environment.
At almost age 75, I am comfortable not being in the market - first time since '76.

"Bulls get rich, Bears get rich but hogs get slaughtered"

It depends on whether you need to live on all of your savings or they are intended to be passed down to your heirs. In my case, I stay full invested as 100% equities in my brokerage account, because all that is in that account will be passed on to my offspring when I pass. I am looking at a 20 to 30-year horizon. My spouse keeps 5 years equivalent of RMD in MYGAs so that he does not need to sell in a down market to fulfill RMD. The other 80% are fully invested in equities.

 

[Montecfo]

I think the thread was referring to investment cash as opposed to emergency cash or spending money.

Having said that, bond funds work fine. No one was ever told that high duration bond funds would "work" when rates move up 500 basis points!

But for my spending cash I ladder bonds maturing quarterly. Seems to work fairly well.

 

[Wizard]

42.5 years.

 

[Surewhitey]

We've stocked up on 5-7 yr CD's for ~8 years spending. Treasuries and MM's are another 4 years. Some of this is for DW's next car and my 2025 SEP 401k and profit sharing...

Keep ~$4k for crap/fan day...

 

[Palmtree]

Since the market rose up so much in 2023 & 2024, a couple of months ago I put away 10 years of spending in a combination of money markets, T-bills and a TIPS ladder. This covers our floor level expenses for the next decade. Beyond that we have 10% cash in the other assets.

 

[iloveyoga]

About 10% of my IRA is in money market. I transfer any dividends into this fund and use it for any needed expenses. For balancing purposes, I count it as part of my fixed account. Easy and works for us.

 

[Badger]

There is enough cash to live on for the remaining years we have left when including SS and small pensions. The investments will be for inheritance.

 

[Coaster4Now]

In cash (MM etc)
2 years worth of living expenses outside of investment accounts.
17% of investment portfolio (upped in the past few months, for a comfortable sleep well factor.)

 

[Stormy Kromer]

Back to the OP. I keep two years of living expense in MM funds, getting around 4% at Vanguard.

I maybe switched the topic earlier in this thread by confusing bonds with cash. Big difference.

As for cash on the sidelines. I don't keep any. My investment plan has me fully invested at my asset allocation for life. Any cash I have is earmarked for two years of living expense, the rest is fully invested. I don't keep any dry powder waiting for an opportunity, I've already bought the opportunity I was hoping to have, I don't try to time the market. I'm already in the market.

 

[COcheesehead]

I have never had an emergency fund. 40 years of investing without setting aside cash for the inevitable emergency. There is always a way to pay. A credit card gets you 30 days to think about how. An emergency fund is one of those financial things that most think is necessary (I could name many more) when it’s really not.

 

[TheWizard]

Jo

I have never had an emergency fund. 40 years of investing without setting aside cash for the inevitable emergency. There is always a way to pay. A credit card gets you 30 days to think about how. An emergency fund is one of those financial things that most think is necessary (I could name many more) when it’s really not.

Job loss is the primary reason, I think.
This retired folks don't need one...

 

[Mr. Tightwad]

I have never had an emergency fund. 40 years of investing without setting aside cash for the inevitable emergency. There is always a way to pay. A credit card gets you 30 days to think about how. An emergency fund is one of those financial things that most think is necessary (I could name many more) when it’s really not.

An exception would be if you're a landlord. I'm one and I've always had a few bucks tucked away just in case.

Fortunately in 33 years I've never needed it but I'm sure others might.

 

[Montecfo]

If cash is "on the sidelines" , it is preparing to get back into the game. This is different than emergency cash or a spending runway.

I still have a good bit on the sidelines, mostly in MM funds acting as a quasi bond proxy. This is true even after quite a bit of buying during the market turmoil. Cash on the sidelines is down to about 8%.

During the next panic I will continue to re-deploy.

 

[Dtail]

Back to the OP. I keep two years of living expense in MM funds, getting around 4% at Vanguard.

I maybe switched the topic earlier in this thread by confusing bonds with cash. Big difference.

As for cash on the sidelines. I don't keep any. My investment plan has me fully invested at my asset allocation for life. Any cash I have is earmarked for two years of living expense, the rest is fully invested. I don't keep any dry powder waiting for an opportunity, I've already bought the opportunity I was hoping to have, I don't try to time the market. I'm already in the market.

Cash on the sidelines can be used as an emergency fund or monies sitting in a MM fund for example waiting to be employed into something else.
In my case, it is the latter. Still fully invested, but waiting for stocks to drop a lot or yields to go much higher to employ into a different investment vehicle.

 

[WhenIsItTime]

I deployed some cash during 'tariff on' and just returned to cash with latest 'tariff off'. Nice for a 10%+ gain in <45 days. This scratches the itch to trade.

 

[Gumby]

What does the OP mean by "cash"? Savings and checking at a bank? Money market fund? Treasuries? I would argue that all are cash, but some might disagree. Similarly, if we are talking about a MM fund or treasuries, is that in a taxable account, tax free account (Roth) or a tax deferred account (tIRA, 401k, etc)? I think the latter option would need to be discounted for taxes. Without a common definition, one cannot draw any particular conclusions from the responses

 

[COcheesehead]

An exception would be if you're a landlord. I'm one and I've always had a few bucks tucked away just in case.

Fortunately in 33 years I've never needed it but I'm sure others might.

That’s a little different. That’s a business and having capital reserves is just good business.

 

[corn18]

What does the OP mean by "cash"? Savings and checking at a bank? Money market fund? Treasuries? I would argue that all are cash, but some might disagree. Similarly, if we are talking about a MM fund or treasuries, is that in a taxable account, tax free account (Roth) or a tax deferred account (tIRA, 401k, etc)? I think the latter option would need to be discounted for taxes. Without a common definition, one cannot draw any particular conclusions from the responses

My interpretation of the OP was that they were asking about cash of any kind sitting on the sidelines waiting to be invested actively (based on the title of this particular forum). That is a lot different than an emergency fund or fixed income allocation.

 

[COcheesehead]

My interpretation of the OP was that they were asking about cash of any kind sitting on the sidelines waiting to be invested actively (based on the title of this particular forum). That is a lot different than an emergency fund or fixed income allocation.

I agree. Money that would otherwise normally be invested.

 

[GBcycling]

I have never had an emergency fund. 40 years of investing without setting aside cash for the inevitable emergency. There is always a way to pay. A credit card gets you 30 days to think about how. An emergency fund is one of those financial things that most think is necessary (I could name many more) when it’s really not.

That's an idea for a thread!

 

[GBcycling]

Removing money that is for spending(living off brokerage income this year and setting aside cash to pay for a wedding) have maybe 1 or 2% investible cash in JAAA.

 

[imjustawarrior]

We keep 1-2 months for expenses in MMF. Everything else in equities and bonds. We do not have an emergency fund. I'm not sure we really ever had an emergency fund. We just know how to raise money for an emergency.

Only time there is money on the sideline is when we let it build up because we are about to spend it (e.g., new car) or do our backdoor Roths.