How much to hold in cash?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Topic Author
PTGuy1
Posts: 18
Joined: Sat Jun 09, 2018 8:01 am

How much to hold in cash?

Post by PTGuy1 » Mon Oct 14, 2019 7:39 am

I've been musing on the famous Talmudic quote about investing “Let every man divide his money into three parts, and invest a third in land, a third in business, and a third let him keep by him in reserve,” and wondering people's thoughts on how much cash to hold generally speaking?

User avatar
bengal22
Posts: 1843
Joined: Sat Dec 03, 2011 6:20 pm
Location: Ohio

Re: How much to hold in cash?

Post by bengal22 » Mon Oct 14, 2019 7:43 am

I don't hold cash because I consider everything but my home accessible. My credit card can handle any emergency and I can convert my taxable funds within 1-2 days.
"Earn All You Can; Give All You Can; Save All You Can." .... John Wesley

student
Posts: 4135
Joined: Fri Apr 03, 2015 6:58 am

Re: How much to hold in cash?

Post by student » Mon Oct 14, 2019 7:44 am

I have no great wisdom to offer and I can only tell you that I have about 5% in cash, which includes emergency fund.

User avatar
RickBoglehead
Posts: 4874
Joined: Wed Feb 14, 2018 9:10 am
Location: In a house

Re: How much to hold in cash?

Post by RickBoglehead » Mon Oct 14, 2019 7:45 am

If you peruse the forum, you'll see people hold 6 to 12 months in emergency funds. Retirees may hold 2 years of expenses.
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.

jebmke
Posts: 9832
Joined: Thu Apr 05, 2007 2:44 pm

Re: How much to hold in cash?

Post by jebmke » Mon Oct 14, 2019 7:55 am

You will get a range of responses. We are retired 11 years. Haven't held any cash in decades other than enough in checking to pay bills.
When you discover that you are riding a dead horse, the best strategy is to dismount.

User avatar
jabberwockOG
Posts: 1827
Joined: Thu May 28, 2015 7:23 am

Re: How much to hold in cash?

Post by jabberwockOG » Mon Oct 14, 2019 8:06 am

The answer for us is how much do we spend each year times five. We hold apprx 5 years of average cost of living for us in a mix of savings, laddered CDs, and short term bond funds that lately (last 12-18 months) have earned apprx 2.5%. This is a relatively small portion of the portfolio so it does not significant impact overall performance. We draw monthly living expenses from the savings bucket and replenish periodically only when the market is in a relative "up" condition. My hopeful plan is that having 5 years expenses in relatively liquid stable investments means I will almost never have to sell equities in a down market. Longer term down market exceptions do occur but I think 5 years leeway outlasts most.

runner3081
Posts: 2568
Joined: Mon Aug 22, 2016 3:22 pm

Re: How much to hold in cash?

Post by runner3081 » Mon Oct 14, 2019 8:29 am

Cash, is in cash in hand?

In that case, anywhere between $400-$800 at any given time at the house (including wallet money).

There is always $330 in my wallet.

$280 in 20's, $20 in 10's. $15 in 5's and $5 in 1's.

If talking banks, we have roughly 30 months of current expenses in savings/checking/iBonds/CD's. However, we are frugal, so this isn't a ton (mid 5-figures)

22twain
Posts: 2111
Joined: Thu May 10, 2012 5:42 pm

Re: How much to hold in cash?

Post by 22twain » Mon Oct 14, 2019 8:37 am

jebmke wrote:
Mon Oct 14, 2019 7:55 am
You will get a range of responses. We are retired 11 years. Haven't held any cash in decades other than enough in checking to pay bills.
+1

I've been retired only about three years. I keep enough cash in my checking account so i don't have to watch it like a hawk to stay above the minimum balance. I keep enough in my brokerage money market fund (for replenishing the checking account) so I need to sell ETF shares only once or twice a year, keeping my taxes relatively simple.

When I start collecting Social Security and RMDs in a few years, I'll probably take the RMDs once per year. If I need to supplement SS, I'll leave enough of the RMD in my money market fund to cover that, and invest the rest so as to maintain my target asset allocation.
Last edited by 22twain on Mon Oct 14, 2019 9:24 am, edited 1 time in total.
My investing princiPLEs do not include absolutely preserving princiPAL.

BogleMelon
Posts: 2154
Joined: Mon Feb 01, 2016 11:49 am

Re: How much to hold in cash?

Post by BogleMelon » Mon Oct 14, 2019 8:42 am

I am still working. I am saving for various goals using different buckets. That is causing me too much cash. I have just decided to invest anything that is over $50,000 in a 30%-70% portfolio.
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

renue74
Posts: 1775
Joined: Tue Apr 07, 2015 7:24 pm

Re: How much to hold in cash?

Post by renue74 » Mon Oct 14, 2019 8:42 am

bengal22 wrote:
Mon Oct 14, 2019 7:43 am
I don't hold cash because I consider everything but my home accessible. My credit card can handle any emergency and I can convert my taxable funds within 1-2 days.
+1 This. I can liquidate bond funds in 2 days if I needed a huge amount of cash. These days, nobody really expects you to cough up a lot of cash quickly.

MikeG62
Posts: 2238
Joined: Tue Nov 15, 2016 3:20 pm
Location: New Jersey

Re: How much to hold in cash?

Post by MikeG62 » Mon Oct 14, 2019 9:03 am

PTGuy1 wrote:
Mon Oct 14, 2019 7:39 am
I've been musing on the famous Talmudic quote about investing “Let every man divide his money into three parts, and invest a third in land, a third in business, and a third let him keep by him in reserve,” and wondering people's thoughts on how much cash to hold generally speaking?
What is your definition of cash?

Is it only funds in an online or B&M savings account? Does it include funds in a MM account or fund? What about CD's? Traditional or no-penalty or both? What about Treasuries? What you might call cash I might call the short end of my fixed income exposure.

Is the question how much of your financial assets are outside of equities or bond funds?

It's hard to answer the question as asked without more clarity IMHO.
Real Knowledge Comes Only From Experience

guilard1
Posts: 14
Joined: Fri Mar 02, 2018 11:25 am

Re: How much to hold in cash?

Post by guilard1 » Mon Oct 14, 2019 9:05 am

jebmke wrote:
Mon Oct 14, 2019 7:55 am
You will get a range of responses. We are retired 11 years. Haven't held any cash in decades other than enough in checking to pay bills.
How do you get money to pay the bills? Do you just pay it with Social Security (or some other passive income or annuity)?

Broken Man 1999
Posts: 3456
Joined: Wed Apr 08, 2015 11:31 am

Re: How much to hold in cash?

Post by Broken Man 1999 » Mon Oct 14, 2019 9:51 am

jebmke wrote:
Mon Oct 14, 2019 7:55 am
You will get a range of responses. We are retired 11 years. Haven't held any cash in decades other than enough in checking to pay bills.
Same here, though not retired as many years. Only 4 thru this year.

We have no cash holdings for expenses. We also have no emergency fund, never have had one.

Our only cash is from monthly withdrawals from our retirement portfolio, plus our SS benefits. These funds are used for our immediate expenses.

We have always had good credit, and have not yet experienced a requirement of needing an unusually large amount of cash, for any reason, over our long marriage.

Through our portfolio we can come with an enormous amount of cash in two business days, or less. We have a lot of I-Bonds which could be converted to cash immediately if a business day.

Our credit card limits are ridiculously high, so tapping a cash advance would be very easy. Or, I could raise a bit selling some coins. IOW, I feel we don't need to hold cash, we just need something or somethings easily converted to cash. And, we have plenty of means to do so.

There are those who feel more comfortable holding larger amounts of cash. Whatever amount makes YOU comfortable is the right answer. Though, there are costs to holding very large amounts of cash.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

jebmke
Posts: 9832
Joined: Thu Apr 05, 2007 2:44 pm

Re: How much to hold in cash?

Post by jebmke » Mon Oct 14, 2019 10:12 am

guilard1 wrote:
Mon Oct 14, 2019 9:05 am
jebmke wrote:
Mon Oct 14, 2019 7:55 am
You will get a range of responses. We are retired 11 years. Haven't held any cash in decades other than enough in checking to pay bills.
How do you get money to pay the bills? Do you just pay it with Social Security (or some other passive income or annuity)?
I am not on SS yet. Just started my pension although that doesn't cover all our bills.

Most of our expenses are either charged to a credit card or direct debit. I have arranged all the DDs to hit at the same time every month. The CCs are normally due mid-month. At the end of the prior month, I add up my needs for the next month, go into Vanguard and sell something. Sometimes there is enough cash from recent dividends so I don't need to sell anything.
When you discover that you are riding a dead horse, the best strategy is to dismount.

User avatar
ruralavalon
Posts: 16679
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: How much to hold in cash?

Post by ruralavalon » Mon Oct 14, 2019 10:47 am

PTGuy1 wrote:
Mon Oct 14, 2019 7:39 am
I've been musing on the famous Talmudic quote about investing “Let every man divide his money into three parts, and invest a third in land, a third in business, and a third let him keep by him in reserve,” and wondering people's thoughts on how much cash to hold generally speaking?
Age 74, retired.

We hold almost no cash, just a few months worth of living expenses (net of Social Security) in our joint checking account.

Social Security and Required Minimum Distributions (RMDs) from.my rollover IRA are automatically deposited in our joint checking account every month, and are enough to cover our normal living expenses.

High limit credit cards, a significant joint taxable account, and Roth IRAs can all be used for quick, penalty-free and tax-free access to more money in an emergency.
Last edited by ruralavalon on Mon Oct 14, 2019 10:55 am, edited 1 time in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Mr. Rumples
Posts: 312
Joined: Sun Aug 25, 2019 7:16 am

Re: How much to hold in cash?

Post by Mr. Rumples » Mon Oct 14, 2019 10:55 am

The quote often misses the last part, where cash is to be held for a profitable transaction.

"...And he said again: It is advisable for one that he shall divide his money in three parts, one of which he shall invest in real estate, one of which in business, and the third part to remain always in his hands (as it may happen that he will need cash for a profitable transaction)..."

Tractate Bava Metzia: Chapter 3, Gemara

User avatar
Leif
Posts: 2708
Joined: Wed Sep 19, 2007 4:15 pm

Re: How much to hold in cash?

Post by Leif » Mon Oct 14, 2019 11:17 am

The first answer to almost any investment question is "it depends".

I'm retired with some cash flow coming in from investments. I estimate my cash needs over multiple years. It starts with my current cash flow and continues with any insight I can bring to my needs in the future. I have about 1 year's worth of residual cash needs (cash needed beyond my income) in a money market fund. I also have a CD ladder with CD maturing every year that I can replenish my cash and I can either roll over to another CD or for new investments.

Once I reach 70 and start collecting SS (monthly) and RMDs (yearly, or as needed) my need for ready cash will greatly diminish.

I find this more useful than looking at it as a certain percentage of my portfolio (such as your 1/3, 1/3, 1/3). That doesn't have much bearing on my cash flow.
Last edited by Leif on Mon Oct 14, 2019 11:23 am, edited 1 time in total.

User avatar
AerialWombat
Posts: 879
Joined: Tue May 29, 2018 1:07 pm

Re: How much to hold in cash?

Post by AerialWombat » Mon Oct 14, 2019 11:21 am

I am still accumulating, have been destitute and homeless before, run a business, and have rental properties.

I like having a lot of cash sitting around to pay every bill well ahead of time, cover nearly any property calamity, and have a psychological safety blankie. At any given time, I have about a year of personal living expenses readily available in checking, plus more at Vanguard in something safe (currently Prime MM, as a temporary default).
“Life doesn’t come with a warranty.” -Michael LeBoeuf

robertmcd
Posts: 554
Joined: Tue Aug 09, 2016 9:06 am

Re: How much to hold in cash?

Post by robertmcd » Mon Oct 14, 2019 11:23 am

No cash other than a couple thousand for credit cards/rent, etc before it goes straight into stocks and bonds in taxable account. IMO At a certain point, a sizeable taxable portfolio makes it unnecessary to hold cash if you are holding a portfolio with the proper amount of risk. But for a 100% stock portfolio for someone who is not happy with bond yields - you should hold an emergency fund in cash.

nesdog
Posts: 131
Joined: Thu Dec 07, 2017 8:20 pm

Re: How much to hold in cash?

Post by nesdog » Mon Oct 14, 2019 11:28 am

By most standards, we are way too high, probably 20% of total. Had an inheritance that we moved mostly into T-Bills while deciding what to do with it. Also just retired in June and bulked up MM accounts as we see how real life plays out compared to our projections. Delaying SS so that also figures in.

I imagine we will adjust over the next 6-18 months per our desired AA but for now, it's all about sleeping well and not worrying about the opportunity costs.
Insert clever comment here...

MathWizard
Posts: 3630
Joined: Tue Jul 26, 2011 1:35 pm

Re: How much to hold in cash?

Post by MathWizard » Mon Oct 14, 2019 11:59 am

Regarding the quote, 2/3's would be illiquid assets.
Funds in investment accounts are fairly liquid in normal circumstances, so 1/3 in reserve
would include mutual funds and govt bonds, for example.

However, in a severe national emergency these accounts might not be completely liquid, so
some some cash where you can get your hands on it in a hurry, is prudent.

In 2001, the NYSE was closed from 9/11 until 9/17. It might have stayed closed longer had further attacks happened.

In 1933, the US had a weeklong "banking holiday" when you could not access bank funds.

These were severe situations, but other countries have faced even more severe situations, and
though I do not expect them to happen in the US, nothing makes the US completely immune.

That is why I keep a few hundred dollars at home, and from $5K to $30K in a local brick and mortar bank.

User avatar
tennisplyr
Posts: 2347
Joined: Tue Jan 28, 2014 1:53 pm
Location: Sarasota, FL

Re: How much to hold in cash?

Post by tennisplyr » Tue Oct 15, 2019 7:08 am

Lots of threads on this over time.
Those who move forward with a happy spirit will find that things always work out.

typical.investor
Posts: 1258
Joined: Mon Jun 11, 2018 3:17 am

Re: How much to hold in cash?

Post by typical.investor » Tue Oct 15, 2019 7:13 am

PTGuy1 wrote:
Mon Oct 14, 2019 7:39 am
I've been musing on the famous Talmudic quote about investing “Let every man divide his money into three parts, and invest a third in land, a third in business, and a third let him keep by him in reserve,” and wondering people's thoughts on how much cash to hold generally speaking?
Research says $2,467 if you are low income. https://papers.ssrn.com/sol3/papers.cfm ... stractlink
Our key finding is that the threshold point is $2,467 with a 95% confidence interval of $1,814–$3,011 (in 2019 dollars) or roughly 1 month of income for the average low-income household – which is far less than the savings amounts implied by common rules of thumb (typically 3–6 months of income).
Or as cited by MarketWatch:
New research by Emily Gallagher, a financial professor at the University of Colorado and an economist at the Federal Reserve Bank of St. Louis, and Jorge Sabat, a financial professor at the Universidad Diego Portales in Chile, say the amount of money you have put aside for an emergency may also help predict how likely you are to use it.

“[O]nce you have at least $2,467 stored away for a rainy day, your probability of experiencing hardship in the next six months is low, and saving an additional dollar doesn’t seem to help reduce that probability very much,” Gallagher told MarketWatch.
https://www.marketwatch.com/story/why-2 ... 2019-10-15

Mr.BB
Posts: 1055
Joined: Sun May 08, 2016 10:10 am

Re: How much to hold in cash?

Post by Mr.BB » Tue Oct 15, 2019 7:18 am

We hold the year of expenses in a emergency fund.
The best answer is really what helps you sleep best at night.
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."

bradinsky
Posts: 165
Joined: Sat Jul 21, 2018 6:32 am

Re: How much to hold in cash?

Post by bradinsky » Tue Oct 15, 2019 7:35 am

2 years in CDs, high yield MMA & checking. It helps my wife sleep well at night :happy

dbr
Posts: 30798
Joined: Sun Mar 04, 2007 9:50 am

Re: How much to hold in cash?

Post by dbr » Tue Oct 15, 2019 8:40 am

Reserve in the Talmudic sense does not mean only or even any cash.

pyld76
Posts: 272
Joined: Thu Feb 09, 2012 4:15 pm

Re: How much to hold in cash?

Post by pyld76 » Tue Oct 15, 2019 9:14 am

A year's worth of expenses. Which is probably 2-3x more than I should be holding. Loss of a job early career for a very short spell left a mark which produces a cognitive bias towards too much cash, although that might be driven by the relative difficultly of trying to make a cash allocation hold up to inflation over the past decade plus of low-rate nonsense.

Planner01
Posts: 86
Joined: Mon Dec 26, 2016 2:44 pm

Re: How much to hold in cash?

Post by Planner01 » Sun Oct 20, 2019 7:03 am

I hold 7 months worth of expenses. Not designed specifically that way, just picked a nice round number I liked to keep in a liquid high yield savings accts. Plus yearly vacation fund and new car fund.

Green Street
Posts: 75
Joined: Tue Jan 02, 2018 5:00 pm

Re: How much to hold in cash?

Post by Green Street » Sun Oct 20, 2019 8:41 am

Typically hold about 10% of networth in cash. That’s for opportunity investments, and subconsciously for a downpayment on a home.
Searching Through The FiRE

UpperNwGuy
Posts: 2647
Joined: Sun Oct 08, 2017 7:16 pm

Re: How much to hold in cash?

Post by UpperNwGuy » Sun Oct 20, 2019 9:08 am

I begin each month with that month's living expenses in checking, and I run the balance down to zero at the end of the month. I have a money market fund for my next car, and a savings account to cover the cost of my next two vacations. Everything else is invested.

dbr
Posts: 30798
Joined: Sun Mar 04, 2007 9:50 am

Re: How much to hold in cash?

Post by dbr » Sun Oct 20, 2019 9:23 am

In any case assets held in cash are "invested" the same as anything else. One should calculate out the risk and return of the whole and see if the result is suitable to one's objectives. How far one goes in counting up cash is just a matter of convenience and relevance. Adding in the pennies in the coin jar probably is not relevant unless you have some of these: http://cointrackers.com/blog/11/most-valuable-coins/

User avatar
Sandtrap
Posts: 8468
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii No Ka Oi , N. Arizona

Re: How much to hold in cash?

Post by Sandtrap » Sun Oct 20, 2019 9:26 am

jabberwockOG wrote:
Mon Oct 14, 2019 8:06 am
The answer for us is how much do we spend each year times five. We hold apprx 5 years of average cost of living for us in a mix of savings, laddered CDs, and short term bond funds that lately (last 12-18 months) have earned apprx 2.5%. This is a relatively small portion of the portfolio so it does not significant impact overall performance. We draw monthly living expenses from the savings bucket and replenish periodically only when the market is in a relative "up" condition. My hopeful plan is that having 5 years expenses in relatively liquid stable investments means I will almost never have to sell equities in a down market. Longer term down market exceptions do occur but I think 5 years leeway outlasts most.
+1
Similar strategy for us.
DW and I sleep well with it.
j :happy
Wiki Bogleheads Wiki: Everything You Need to Know

catlady
Posts: 44
Joined: Sat Mar 26, 2016 8:31 pm

Re: How much to hold in cash?

Post by catlady » Sun Oct 20, 2019 9:28 am

We keep about $2500 in checking, 1-1.5 months expenses in savings, and 4 months in I bonds. We’re planning to grow our I bond position to somewhere between 12-18 months expenses.

User avatar
billthecat
Posts: 437
Joined: Tue Jan 24, 2017 2:50 pm

Re: How much to hold in cash?

Post by billthecat » Sun Oct 20, 2019 9:37 am

If by cash you mean anything that doesn't change in value (cash, checking, savings, money market, CDs, I Bonds, etc.) then the target for my portfolio is 5% (based on Schwab's "moderate" asset allocation) plus 6 months in a separate account that I spend down to zero over the 6 months (then replenish from my portfolio and rebalance). (Edit: another 35% of my portfolio is targeted for bonds, making my total portfolio 60% stock, 40% fixed income, of which 5% is cash.) I'm not retired quite yet, but that's the plan.

Why 6 months? Because that is the super cycle of the dividends I receive (some are monthly, some quarterly, some semi-annually). So I sweep them into the 6 month account and top up from the portfolio.

Why a separate account for the 6 months? Separate ATM card - it shields my main account from the rest of the world.
Last edited by billthecat on Mon Oct 21, 2019 12:14 am, edited 1 time in total.
We cannot direct the winds but we can adjust our sails.

dbr
Posts: 30798
Joined: Sun Mar 04, 2007 9:50 am

Re: How much to hold in cash?

Post by dbr » Sun Oct 20, 2019 9:46 am

I bonds have been or can be a good enough investment that one might hold as much of those as one can build up over the years. That would have nothing to do with how much "cash" one holds.

flyingaway
Posts: 2534
Joined: Fri Jan 17, 2014 10:19 am

Re: How much to hold in cash?

Post by flyingaway » Sun Oct 20, 2019 9:55 am

What is the precise definition of cash?
(1) Real paper money, (2) Money in a checking, (2) Money in a high yield savings account or CD, (3) Money in a money market account, (4) Money in a short-term bond, (5) Money in a total bond market fund, (6) All money that is not invested in stocks.
All of them could be considered as cash or fixed income.

dbr
Posts: 30798
Joined: Sun Mar 04, 2007 9:50 am

Re: How much to hold in cash?

Post by dbr » Sun Oct 20, 2019 10:03 am

flyingaway wrote:
Sun Oct 20, 2019 9:55 am
What is the precise definition of cash?
(1) Real paper money, (2) Money in a checking, (2) Money in a high yield savings account or CD, (3) Money in a money market account, (4) Money in a short-term bond, (5) Money in a total bond market fund, (6) All money that is not invested in stocks.
All of them could be considered as cash or fixed income.
There is no proper definition as far as discussions on this forum apply. Each discussion requires an enumeration of what is being discussed and why. The point is that the discussion is about how things work rather than behaving according to what things are called.

Depending on what the discussion is, any of your items above could be the topic at hand. Probably most people ignore 1) and would lump 2), and 3), and would lump 4) and 5) into 6). But everyone has there own question or problem to be solved.

I wrote this on another thread in reply to a post by nisiprius that I agree with:

nisiprius wrote: ↑
Sun Oct 20, 2019 9:36 am


"Look, classifying things for asset allocation purposes isn't an exact science. You have to do what's useful for you.

If the purposes of determining your asset allocation is to compare it with something you've seen somewhere about e.g. safe withdrawal rates, then it won't be a valid comparison unless you use categories that are reasonably similar to theirs."

This is the really useful statement in all of this. It is about how things work rather than about what things are called.

If someone wants to know how large a balance they should hold in their checking account no one here can tell them that. There are as many different answers to that as there are participants on the forum.

Maybe more to the point would be to identify what problem is at hand and how people solve it.

What happens with me is that I have income streams that support most of my routine expenses. That includes dividends from taxable investments. This income gets deposited in a checking account. Most of our routine spending is through credit cards that are paid off monthly or is by direct debit from the checking account. When we take an RMD from retirement accounts we pay the year's taxes by withholding and the remaining cash goes into the checking account. The net result of all this is an amount of cash that floats up and down as may be.

If we need to spend a lot of money all at once it could be something in the taxable account would be sold. It could be the RMD would be enough excess that some of it should be invested, or the excess could be held for awhile to pay for that thing.

The total amount held in cash at any given time is such a small fraction of assets and of spending that what interest might be earned on it is not something I waste time thinking about.

Other people may have problems of some kind that need to be solved that produce a different solution in terms of holding cash.
Top

Dandy
Posts: 5999
Joined: Sun Apr 25, 2010 7:42 pm

Re: How much to hold in cash?

Post by Dandy » Sun Oct 20, 2019 1:21 pm

71 with a 43/57 overall allocation. Fixed income is about 30% "No Loss of Principal" (Savings, money market, CDs), 30% Short Term bond funds and 40% Intermediate bond funds (including TIPS fund).

Roughly follow Dr. Wm Bernstein's idea for those who have "enough" of having 20 or so drawdown dollars needed in "safe" products. Withdraw from a combination of equities and fixed income unless equities have a really bad downturn. This withdrawal approach often results in extra "safe" assets which I invest, gift or spend. Sleep well.

Dude2
Posts: 924
Joined: Fri Jun 08, 2007 3:40 pm
Location: Abu Dhabi

Re: How much to hold in cash?

Post by Dude2 » Sun Oct 20, 2019 10:36 pm

I am holding approximately 5%. I am still in the accumulation phase of life, but this is my emergency fund.

There are two equivalent ways of working the allocation out.
a) you steal equally from bonds and stocks, e.g. take 2.5% from stock, 2.5% from bonds
b) you just consider the cash portion not part of the portfolio

If you do it that way, then your stock/bond AA doesn't change. I am using the cash as my emergency fund which means that if I have to spend it, then it doesn't affect my stock/bond ratio.

OTOH, maybe you might like to consider cash as part of the bond allocation. Then it could be a matter of determining what you want your overall bond duration to be, and use the cash to shorten it up.

User avatar
Wiggums
Posts: 1913
Joined: Thu Jan 31, 2019 8:02 am

Re: How much to hold in cash?

Post by Wiggums » Sun Oct 20, 2019 10:45 pm

I’m at 70/30 right now. So I’m assume ng that cash means your fixed income. In my case is about 30% and I retired at age 56.

People who are employed and still accumulating wrath will prolly have less cash.

dbr
Posts: 30798
Joined: Sun Mar 04, 2007 9:50 am

Re: How much to hold in cash?

Post by dbr » Mon Oct 21, 2019 9:03 am

Wiggums wrote:
Sun Oct 20, 2019 10:45 pm
I’m at 70/30 right now. So I’m assume ng that cash means your fixed income. In my case is about 30% and I retired at age 56.

People who are employed and still accumulating wrath will prolly have less cash.
It should mean fixed income if by the Talmudic advice we translate that to real estate, stocks, and fixed income. But he said cash and why would one say cash if one didn't mean it? Then again distinguishing cash from other fixed income has always been an idea I don't quite get.

The bigger question about that advice is that almost no one owns land as such, meaning farmland mostly but maybe timber land. Those who do own land, such as farmers, probably do not own much else perhaps excepting machinery to work the land and maybe big loans to finance planting. I could be wrong about the asset ownership of family farmers. On the other hand corporate farming is a business that owns or rents land and big business timber interests I think mainly lease land.

I am not sure this sort of advice really translates over millenia.

User avatar
1789
Posts: 298
Joined: Fri Aug 16, 2019 3:31 pm
Location: OR

Re: How much to hold in cash?

Post by 1789 » Wed Oct 23, 2019 1:05 am

We are holding cash worth six months of expenses(25k) in VMMXX. I would like to increase it to cover one year.
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)

User avatar
dogagility
Posts: 634
Joined: Fri Feb 24, 2017 6:41 am

Re: How much to hold in cash?

Post by dogagility » Wed Oct 23, 2019 5:32 am

Cash? My wallet is always empty except for plastic. I don't buy anything costing less than a dollar and use a credit card for all transactions. (Yeah, I don't buy girl scout cookies when walking to and from the supermarket either... I know... I'm a bad person. :happy )
Money market/checking (Fidelity)? About two months of expenses.
I've never needed more than a couple of thousand dollars readily accessible (within a couple of days) during my 30 years of adult life.
Taking "risk" since 1995.

goblue100
Posts: 1020
Joined: Sun Dec 01, 2013 10:31 am

Re: How much to hold in cash?

Post by goblue100 » Wed Oct 23, 2019 6:06 am

I have a bucket of coins in my closet, I estimate about $30 worth. I have about $50 in my wallet. I'm afraid that is all the cash I have at the moment.
Financial planners are savers. They want us to be 95 percent confident we can finance a 30-year retirement even though there is an 82 percent probability of being dead by then. - Scott Burns

User avatar
Toons
Posts: 13410
Joined: Fri Nov 21, 2008 10:20 am
Location: Hills of Tennessee

Re: How much to hold in cash?

Post by Toons » Wed Oct 23, 2019 7:20 am

50k
For Us

:mrgreen:
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

User avatar
quisp65
Posts: 60
Joined: Wed Apr 10, 2019 7:44 am

Re: How much to hold in cash?

Post by quisp65 » Wed Oct 23, 2019 3:03 pm

Whatever works best in your system..... I was back and forth on this but I think I decided on this when I retire in about 1 year....


1-3 years living expenses short term corporate (VFSUX) (my cash) ...my ST bonds are my cash :-P

5 yr ladder involving highest rate Bank CD I can find each year. Use the fluctuating 1-3 year expense bond fund to keep the ladder somewhat equal.

I'll go 75/25% VTSAX/Fixed Income till my parents gift pension stops when they die and maybe go 70/30 then. As I age and hopefully get more money, I'll get lazy and convert the CDs to a bond fund or at least brokered CDs. I feel the bank CDs is the best fixed income you can find now and I'm too poor to be lazy.

User avatar
willthrill81
Posts: 13884
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: How much to hold in cash?

Post by willthrill81 » Wed Oct 23, 2019 3:19 pm

bengal22 wrote:
Mon Oct 14, 2019 7:43 am
I don't hold cash because I consider everything but my home accessible. My credit card can handle any emergency and I can convert my taxable funds within 1-2 days.
I agree, although I do carry a fair amount of hard cash on my person, which has come in handy many times.

People don't need cash per se. They need some amount of liquid assets.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

User avatar
abuss368
Posts: 16008
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: How much to hold in cash?

Post by abuss368 » Sun Oct 27, 2019 7:40 pm

Check out my one thread “Cash - Throw it all on the table”. I found it to be a very good thread.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

smectym
Posts: 615
Joined: Thu May 26, 2011 5:07 pm

Re: How much to hold in cash?

Post by smectym » Sun Oct 27, 2019 11:52 pm

We hold enough in cash, near-cash, CD’s, and bonds which feature certain cash-like attributes, such as stability of principal (e.g. savings bonds, but there are other examples which we also hold), that if all our equity and intermediate and long-term bond holdings were vaporized, our life would go on as if nothing out of the ordinary had occurred.

HEDGEFUNDIE
Posts: 3640
Joined: Sun Oct 22, 2017 2:06 pm

Re: How much to hold in cash?

Post by HEDGEFUNDIE » Mon Oct 28, 2019 12:39 am

smectym wrote:
Sun Oct 27, 2019 11:52 pm
We hold enough in cash, near-cash, CD’s, and bonds which feature certain cash-like attributes, such as stability of principal (e.g. savings bonds, but there are other examples which we also hold), that if all our equity and intermediate and long-term bond holdings were vaporized, our life would go on as if nothing out of the ordinary had occurred.
If all your equity and bonds were wiped out your cash would also be worthless. That kind of event would mean nothing short of nuclear war or alien invasion.

Which sounds like a joke but actually points to a deeper truth. You simply don’t need that much cash because the financial system (including cash) is all tied together.

Post Reply