Should I keep any cash in my Roth?

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thelateinvestor43
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Should I keep any cash in my Roth?

Post by thelateinvestor43 » Tue Jan 14, 2020 3:26 pm

I only have a little above $12k in my Roth after 2 years (well actually on 3 months of investing, but at the end of one year). I got rid of the International Index in my Roth to instead purchase the "Total International Index" fund at Fidelity and it only had $1200 in it. I then wondered if it was a good idea to leave some cash in the account in case the market goes down and I could purchase more stocks at a discount.

Or does it really not matter with such a small balance at this time?

Is it generally good though to keep a percentage of your Roth in cash?

mystupidglasses
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Re: Should I keep any cash in my Roth?

Post by mystupidglasses » Tue Jan 14, 2020 3:30 pm

Sounds like market-timing to keep cash on the sidelines in a Roth.

Makefile
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Re: Should I keep any cash in my Roth?

Post by Makefile » Tue Jan 14, 2020 3:38 pm

If you must hold on to the idea of buying stocks after a decline, you might be better served purchasing Fidelity Four-in-One Index fund or a Freedom Index fund and letting the fund do the work rather than keeping cash on the side.

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thelateinvestor43
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Re: Should I keep any cash in my Roth?

Post by thelateinvestor43 » Tue Jan 14, 2020 3:40 pm

mystupidglasses wrote:
Tue Jan 14, 2020 3:30 pm
Sounds like market-timing to keep cash on the sidelines in a Roth.
It may be, but how do you purchase more if the market goes way down? I've heard of people keeping cash in their Roth's for that reason. Outside of a Roth in my taxable it's no problem cause I can add more cash to buy more securities at a cheaper price in the future.

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thelateinvestor43
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Re: Should I keep any cash in my Roth?

Post by thelateinvestor43 » Tue Jan 14, 2020 3:42 pm

Makefile wrote:
Tue Jan 14, 2020 3:38 pm
If you must hold on to the idea of buying stocks after a decline, you might be better served purchasing Fidelity Four-in-One Index fund or a Freedom Index fund and letting the fund do the work rather than keeping cash on the side.
I wrestled with the idea of all in one funds, but I'm not sure I like them. I'd rather be able to adjust my AA if things change in the future for some reason, etc. For example, I'm at about 60/40 right now, but as I get older I might want to be 50/50 or even 20/80, who knows. Maybe I'll get tired of rebalancing someday and break down and do it though.

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Doc
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Re: Should I keep any cash in my Roth?

Post by Doc » Tue Jan 14, 2020 3:45 pm

I have a Quicken "reminder" in my ROTH account which says:

"Sweep Cash" eom +1 Jan, Mar, Jun?, Jul, Sep, Nov, Dec

Currently it is being swept to a 1-5 Bond Index fund.

You do not need cash in a ROTH.

Edit: A 1-3 Treasury fund would be a good alternative.

Having ready assets to buy equities in a market downturn is a good idea but those assets need not be cash.

But set up a "if the stock market goes down by X%" criteria so that you don't start churning.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

mystupidglasses
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Re: Should I keep any cash in my Roth?

Post by mystupidglasses » Tue Jan 14, 2020 3:48 pm

thelateinvestor43 wrote:
Tue Jan 14, 2020 3:40 pm
mystupidglasses wrote:
Tue Jan 14, 2020 3:30 pm
Sounds like market-timing to keep cash on the sidelines in a Roth.
It may be, but how do you purchase more if the market goes way down? I've heard of people keeping cash in their Roth's for that reason. Outside of a Roth in my taxable it's no problem cause I can add more cash to buy more securities at a cheaper price in the future.
Decide on a stock/bond split among all your investment accounts in aggregate. Then you only need to rebalance back to that % split if the situation warrants it.

Triple digit golfer
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Re: Should I keep any cash in my Roth?

Post by Triple digit golfer » Tue Jan 14, 2020 4:04 pm

TARGET
RETIREMENT
FUND

KingRiggs
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Re: Should I keep any cash in my Roth?

Post by KingRiggs » Tue Jan 14, 2020 6:19 pm

I thought after watching that guy on YouTube, you weren't going to buy stocks any more, thelateinvestor43... :confused
Advice = noun | Advise = verb | | Roth, not ROTH

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thelateinvestor43
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Re: Should I keep any cash in my Roth?

Post by thelateinvestor43 » Tue Jan 14, 2020 7:24 pm

Doc wrote:
Tue Jan 14, 2020 3:45 pm
I have a Quicken "reminder" in my ROTH account which says:

"Sweep Cash" eom +1 Jan, Mar, Jun?, Jul, Sep, Nov, Dec

Currently it is being swept to a 1-5 Bond Index fund.

You do not need cash in a ROTH.

Edit: A 1-3 Treasury fund would be a good alternative.

Having ready assets to buy equities in a market downturn is a good idea but those assets need not be cash.

But set up a "if the stock market goes down by X%" criteria so that you don't start churning.
short term bonds? I'm with Fidelity. They have a short term index bond fund. WHat do you mean by "1-3", etc?

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danielc
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Re: Should I keep any cash in my Roth?

Post by danielc » Tue Jan 14, 2020 10:22 pm

thelateinvestor43 wrote:
Tue Jan 14, 2020 3:26 pm
I then wondered if it was a good idea to leave some cash in the account in case the market goes down and I could purchase more stocks at a discount.

Or does it really not matter with such a small balance at this time?

Is it generally good though to keep a percentage of your Roth in cash?
Statistically, people who followed that strategy were far more likely to lose money by missing out on stock gains than what they made by buying cheap after a crash. The market goes up a lot more often than it goes down. People who wait for a market downturn usually wait a long time. The market has a very high valuation right now, but the same was true a year ago and in that time the market went up 17%. I think it was Peter Lynch who once said that a lot more money has been lost by investors trying to prepare for a correction than has been lost in the corrections themselves.

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Ged
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Re: Should I keep any cash in my Roth?

Post by Ged » Tue Jan 14, 2020 10:29 pm

thelateinvestor43 wrote:
Tue Jan 14, 2020 3:26 pm

Is it generally good though to keep a percentage of your Roth in cash?
I don't see any reason to do so. Roth accounts do not incur taxes when they appreciate so I think you should keep assets likely to appreciate the most in a Roth account. That would be equities.

The only reason to keep something else in a Roth is if your Roth account holds a larger percentage of your assets than your investment plan calls to be allocated to stocks.

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Doc
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Re: Should I keep any cash in my Roth?

Post by Doc » Wed Jan 15, 2020 7:33 am

thelateinvestor43 wrote:
Tue Jan 14, 2020 7:24 pm
WHat do you mean by "1-3", etc?
1-3 is the maturity range. You often see 1-3 with Treasuries while short term bond funds containing both T's and corporates seem to be more often 1-5. I consider 1-3 Treasury to be cash like but a 1-5 Gov/Credit fund not so much.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

DB2
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Re: Should I keep any cash in my Roth?

Post by DB2 » Wed Jan 15, 2020 9:29 am

mystupidglasses wrote:
Tue Jan 14, 2020 3:48 pm

Decide on a stock/bond split among all your investment accounts in aggregate. Then you only need to rebalance back to that % split if the situation warrants it.
+1

aerosurfer
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Re: Should I keep any cash in my Roth?

Post by aerosurfer » Wed Jan 15, 2020 11:30 am

thelateinvestor43 wrote:
Tue Jan 14, 2020 3:40 pm
mystupidglasses wrote:
Tue Jan 14, 2020 3:30 pm
Sounds like market-timing to keep cash on the sidelines in a Roth.
It may be, but how do you purchase more if the market goes way down? I've heard of people keeping cash in their Roth's for that reason. Outside of a Roth in my taxable it's no problem cause I can add more cash to buy more securities at a cheaper price in the future.

Not trying to promote market timing, but if there was ever a time to stop worrying about short term AA volatility and get invested it's probably this week.

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Tamarind
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Re: Should I keep any cash in my Roth?

Post by Tamarind » Wed Jan 15, 2020 11:34 am

Typically you want your investments with the highest expected return investments in your Roth. International stock qualifies. So does US stock. Cash doesn't.

I agree with those above who are advising you to pick a total AA and allocate across all your accounts to meet it rather than making the decision piecemeal for each account. That doesn't mean hold the same thing in every account, but that you should know what the sum of all your accounts will be in terms of AA.

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thelateinvestor43
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Re: Should I keep any cash in my Roth?

Post by thelateinvestor43 » Wed Jan 15, 2020 4:56 pm

Tamarind wrote:
Wed Jan 15, 2020 11:34 am
Typically you want your investments with the highest expected return investments in your Roth. International stock qualifies. So does US stock. Cash doesn't.

I agree with those above who are advising you to pick a total AA and allocate across all your accounts to meet it rather than making the decision piecemeal for each account. That doesn't mean hold the same thing in every account, but that you should know what the sum of all your accounts will be in terms of AA.
I've picked 60/40 for now and YES it's across my 2 accounts at Fidelity. That's all I have. I have $34k in my savings, BUT I don't include that in my AA cause that's more of emergency money.

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thelateinvestor43
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Re: Should I keep any cash in my Roth?

Post by thelateinvestor43 » Wed Jan 15, 2020 4:57 pm

When I say "cash" I mean money market funds at Fidelity. They pay 1.5%, but it's better than nothing in my bank savings I guess.

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Tamarind
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Re: Should I keep any cash in my Roth?

Post by Tamarind » Wed Jan 15, 2020 5:21 pm

thelateinvestor43 wrote:
Wed Jan 15, 2020 4:56 pm
Tamarind wrote:
Wed Jan 15, 2020 11:34 am
Typically you want your investments with the highest expected return investments in your Roth. International stock qualifies. So does US stock. Cash doesn't.

I agree with those above who are advising you to pick a total AA and allocate across all your accounts to meet it rather than making the decision piecemeal for each account. That doesn't mean hold the same thing in every account, but that you should know what the sum of all your accounts will be in terms of AA.
I've picked 60/40 for now and YES it's across my 2 accounts at Fidelity. That's all I have. I have $34k in my savings, BUT I don't include that in my AA cause that's more of emergency money.
Yep no need to include a savings account. But you should include your Roth.

Does your 60/40 include those money market fund in the 40?

Ferdinand2014
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Re: Should I keep any cash in my Roth?

Post by Ferdinand2014 » Wed Jan 15, 2020 6:09 pm

I personally would not hold cash in my Roth account. I would invest it in a low cost S&P 500 index fund such as FXAIX.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

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