chef Posted April 27, 2015 Report Share Posted April 27, 2015 I actually have about 10% in cash. I'm fully prepared to buy a large chunk of indexes if we have another big pull back like 08. If not I'll continue to keep a large % in cash. I don't even plan on touching my funds(in retirement)unless I'm buying a new home, taking a vacation or some other large expense. I'll just live off me and my wife's pensions, SS and dividends You should invest that 10%. No reason to park cash at this early stage of life. There is no strong evidence for a huge pullback right now other than market history; i.e., it's been on a LONG bull run. But it's till tough to ignore the relative highs lately. Fats forward 3 years and the Dow is at 25K and I feel pretty stupid. But in reality, in you're 90% in, life is still good. In essence, carrying a cash % during a bull market is a form of hedging in and of itself. And a very conservative one at that. If the market goes straight up, you lose the would be growth on that 10%, but if it crashes, you either have cushion to absorb the crash or else have something with which to take advantage. Really quite easy to make an argument either way as along as you're willing and able to stick to the plan. Link to post Share on other sites More sharing options...
Guest Posted April 27, 2015 Report Share Posted April 27, 2015 Jumping in and out of the market at our age based on what you think is a bull or bear market is the best way to fuck up your long range return at our age. It;s cardinal sin #1 of any portfolio manger. Now if you're 70 years old and living off your portfolio it's different. Link to post Share on other sites More sharing options...
OILERMAN Posted April 27, 2015 Report Share Posted April 27, 2015 I've wrestled with putting some of the 10% in the market but I like having it in case of a pull back and also plan to remodel my bathroom and will pay cash when I eventually replace my car etc..... I already max out every retirement account and put a lot in a taxable account Link to post Share on other sites More sharing options...
abenjami Posted April 27, 2015 Report Share Posted April 27, 2015 Why pay cash for a car? I never understand people who do that. Auto loans are dirt cheap. Put the money into something that earns a higher percentage than your car loan rate. Also, it makes no sense to dump cash into a fast depreciating asset when your insurance company will only pay you the FMV if the asset is stolen or totaled. Link to post Share on other sites More sharing options...
OILERMAN Posted April 27, 2015 Report Share Posted April 27, 2015 I assume you mean a new car? Link to post Share on other sites More sharing options...
abenjami Posted April 28, 2015 Report Share Posted April 28, 2015 I assume you mean a new car? New or used. But definitely more applicable to cost vs. age. Link to post Share on other sites More sharing options...
chef Posted April 28, 2015 Report Share Posted April 28, 2015 Jumping in and out of the market at our age based on what you think is a bull or bear market is the best way to fuck up your long range return at our age. It;s cardinal sin #1 of any portfolio manger. Now if you're 70 years old and living off your portfolio it's different. Definitely not talking about that. I only sell something when I feel the position is no longer suited for long-term growth. (I did cash in on some winners to buy my house in Maui, but for now that ain't happening again anytime soon.) Now if I do sell like that and don't have an immediate impulse to buy something else, I might leave it on the side for the moment. I'm more likely to build up a cash position by not investing cash as I make it, not by timing the market. Even people who push the market as all-in long term like Buffett or Tom Gardner from TMF still usually keep about a 10% cash position, especially during an up market. And a lot of my hedge position works off of my margin portfolio, not a direct attack on cash, only liquidity. And even that by definition will be fine in a crash since that's what it's set up for. Link to post Share on other sites More sharing options...
chef Posted April 28, 2015 Report Share Posted April 28, 2015 Why pay cash for a car? I never understand people who do that. Auto loans are dirt cheap. Put the money into something that earns a higher percentage than your car loan rate. Also, it makes no sense to dump cash into a fast depreciating asset when your insurance company will only pay you the FMV if the asset is stolen or totaled. I understand your position, but 1) don't buy new, and 2) don't spend more than you'd really notice, at least once the point you'd really be savvy enough to calc investment return vs a car loan. If you can only easily part with $1,000, buy a thousand dollar car. I am all about using credit when appropriate (see my margin portfolio note above), but the American mentality of How Much Car Can I Afford is a messed up one. At least you get the depreciation part. Most say they do but don't really grasp it fully. When it comes to cars expenditures, I love doing an analysis after I part with one of total real cost per mile and per month. Simple to do if you keep decent records. You quickly realize that any car with a reserved parking spot at a mechanic's is never a bargain at virtually any price. And that the more expensive might actually cost you less in the long run - especially if you can get a good deal on a used one that holds value fairly well (my 911 Cabriolet I had was a great example). Link to post Share on other sites More sharing options...
OILERMAN Posted April 28, 2015 Report Share Posted April 28, 2015 Jumping in and out of the market at our age based on what you think is a bull or bear market is the best way to fuck up your long range return at our age. It;s cardinal sin #1 of any portfolio manger. I'm not talking about jumping in and out. Yes timing the market is a suckers game. I'm(and chef) are talking about just adding more when things go down and stocks are cheaper. Link to post Share on other sites More sharing options...
OILERMAN Posted April 28, 2015 Report Share Posted April 28, 2015 New or used. But definitely more applicable to cost vs. age. I drive an 06 Honda Civic, I could drive it another 8-10 years. When it dies I'll buy another used car with cash and it won't be enough to finance/notice compared to my overall net worth. It won't have any bearing on my investing Link to post Share on other sites More sharing options...
abenjami Posted April 28, 2015 Report Share Posted April 28, 2015 I drive an 06 Honda Civic, I could drive it another 8-10 years. When it dies I'll buy another used car with cash and it won't be enough to finance/notice compared to my overall net worth. It won't have any bearing on my investing Paying cash makes much more sense in this scenario but I still wouldn't do it out of principle. Link to post Share on other sites More sharing options...
Guest Posted April 28, 2015 Report Share Posted April 28, 2015 Why pay cash for a car? I never understand people who do that. Auto loans are dirt cheap. Put the money into something that earns a higher percentage than your car loan rate. Also, it makes no sense to dump cash into a fast depreciating asset when your insurance company will only pay you the FMV if the asset is stolen or totaled. You could say this about anything these days with interest rates being low everywhere. I have a million $ personal credit line that is pretty close to maxed out. I pay around prime on it which is around 3% right now. Why the heck would I take a million $ out of the market to pay it off when I'm chugging along at 15% per annum over the last 5 years? If the bank gave me another million I'd put it right into the market. Now if interest rates and market conditions change it will be different. Link to post Share on other sites More sharing options...
Guest Posted April 28, 2015 Report Share Posted April 28, 2015 Cars are about the least practical thing you can spend money on. Boats are even worse. In terms of financial practicality you should do what Oilerman does i.e. buy a decent second hand car and drive it into the ground. Link to post Share on other sites More sharing options...
Guest Posted April 28, 2015 Report Share Posted April 28, 2015 I'm not talking about jumping in and out. Yes timing the market is a suckers game. I'm(and chef) are talking about just adding more when things go down and stocks are cheaper. It's about parking money which is wrong based on where we are in life and maximizing portfolio gain. If you want top park some cash to keep available for projects or whatever (I usually do) that;s fine and up to you...but thinking you're going to invest that 10% and pull it out according to where you think the market is going is going to cost you money in the long run. How long has that money been parked? You have probably been making 5% per quarter over the last year? You have probably averaged close to 20% per annum over the last 3 years? Long term investors should not park unless they need to keep cash available for other projects. Link to post Share on other sites More sharing options...
chef Posted April 28, 2015 Report Share Posted April 28, 2015 It's about parking money which is wrong based on where we are in life and maximizing portfolio gain. If you want top park some cash to keep available for projects or whatever (I usually do) that;s fine and up to you...but thinking you're going to invest that 10% and pull it out according to where you think the market is going is going to cost you money in the long run. How long has that money been parked? You have probably been making 5% per quarter over the last year? You have probably averaged close to 20% per annum over the last 3 years? Long term investors should not park unless they need to keep cash available for other projects. Well to fully clarify what I am doing, I fundamentally do not have any cash in reserve (well CASH, yes, but not in my portfolio accounts). I'm actually negative on margin. But the hedge I am running - which is losing right now - will pop when the market goes down. At that time I won't plan on selling holdings other than the inverted hedge, which will then in essence become cash to reinvest during a pullback. So no, I haven't had a dollar in a CD or savings account since before I was 20. Though I have held some in a sweep account in TD on various occasions. Link to post Share on other sites More sharing options...
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