How much cash do you really hold?

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jason2459
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Re: How much cash do you really hold?

Post by jason2459 »

Grt2bOutdoors wrote: Wed Apr 07, 2021 2:01 pm
jason2459 wrote: Wed Apr 07, 2021 1:56 pm
Visitor76 wrote: Wed Apr 07, 2021 1:49 pm
flyingaway wrote: Wed Apr 07, 2021 10:28 am When the market crashes, you wish you had more cash.
Not if you're making bi-weekly contributions. :beer
You can have the cake and eat it too.
Lose your job - there goes the cake and your appetite!
Cash isn't the only component that I can tap into in a situation like that.
"In the short run, the stock market is a voting machine; in the long run, it is a weighing machine" ~Benjamin Graham
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GerryL
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Re: How much cash do you really hold?

Post by GerryL »

I keep a healthy cash stash that is built up from monthly income and dividends and RMDs that are not immediately reinvested. This is in checking, savings and CDs. I don't count this cash as part of my portfolio, but if it gets too bulked up, I will move some to the Balanced Index Fund in taxable, at which point it becomes part of my portfolio. The only cash allocation in my portfolio is the RMD amount I move into the MM fund in my IRA in the first half of the year.
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Re: How much cash do you really hold?

Post by beernutz »

I usually just keep a couple months of expenses in cash but in preparation for retirement next year I'm slightly adjusting our asset allocation by keeping the proceeds of an upcoming inheritance in cash, by selling my wife's accumulated ESPP stock, and by selling one actively managed mutual fund I'd been thinking of liquidating anyway.

I've already done the 3rd of those and the other two will likely happen during the next month. Those moves will collectively take us from 73/27 to 68/32 so not a big adjustment but that will give us probably five years of post-retirement cash on hand.

I'll probably spread the cash out between online banks like ally and marcus.
Last edited by beernutz on Wed Apr 07, 2021 2:56 pm, edited 1 time in total.
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Re: How much cash do you really hold?

Post by Visitor76 »

TheTimeLord wrote: Wed Apr 07, 2021 11:16 am I am always intrigued by the BH fascination with this mystical thing called cash. If your money is in something that generates a return it is invested imho. What BH like to call cash is just ultra short duration. So to me cash is what's in my wallet and anything held in a way that doesn't generate a return. That said by what I understand the BH definition of cash to be, the majority of my Fixed Income allocation likely would be considered cash or near cash. I currently see little or no value in holding intermediate or longer term Fixed Income assets. So I am currently erroring by holding increased equity and shorter term fixed income.
Agreed. We keep enough cash on hand to cover 12 months of living expenses and a small God Only Knows fund (GOK) for unexpected expenses. While our taxable account is considered equities, it can serve as a "brake in case of emergency" fund as well.
Last edited by Visitor76 on Wed Apr 07, 2021 2:28 pm, edited 1 time in total.
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Re: How much cash do you really hold?

Post by Visitor76 »

jason2459 wrote: Wed Apr 07, 2021 2:04 pm
Grt2bOutdoors wrote: Wed Apr 07, 2021 2:01 pm
jason2459 wrote: Wed Apr 07, 2021 1:56 pm
Visitor76 wrote: Wed Apr 07, 2021 1:49 pm
flyingaway wrote: Wed Apr 07, 2021 10:28 am When the market crashes, you wish you had more cash.
Not if you're making bi-weekly contributions. :beer
You can have the cake and eat it too.
Lose your job - there goes the cake and your appetite!
Cash isn't the only component that I can tap into in a situation like that.
I'm sorry, but if one losses their job having enough cash to buy the dip will be the least of their concerns.
Wealth is not about having a lot of money; it's about having a lot of options.
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watchnerd
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Re: How much cash do you really hold?

Post by watchnerd »

TheTimeLord wrote: Wed Apr 07, 2021 11:16 am I am always intrigued by the BH fascination with this mystical thing called cash. If your money is in something that generates a return it is invested imho. What BH like to call cash is just ultra short duration. So to me cash is what's in my wallet and anything held in a way that doesn't generate a return. That said by what I understand the BH definition of cash to be, the majority of my Fixed Income allocation likely would be considered cash or near cash. I currently see little or no value in holding intermediate or longer term Fixed Income assets. So I am currently erroring by holding increased equity and shorter term fixed income.
We can call it "short term reserves" like the Vanguard AA pie chart does if that helps.
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Re: How much cash do you really hold?

Post by TheTimeLord »

watchnerd wrote: Wed Apr 07, 2021 2:39 pm
TheTimeLord wrote: Wed Apr 07, 2021 11:16 am I am always intrigued by the BH fascination with this mystical thing called cash. If your money is in something that generates a return it is invested imho. What BH like to call cash is just ultra short duration. So to me cash is what's in my wallet and anything held in a way that doesn't generate a return. That said by what I understand the BH definition of cash to be, the majority of my Fixed Income allocation likely would be considered cash or near cash. I currently see little or no value in holding intermediate or longer term Fixed Income assets. So I am currently erroring by holding increased equity and shorter term fixed income.
We can call it "short term reserves" like the Vanguard AA pie chart does if that helps.
Fine by me. People can call it anything they would like, but to think it isn't an intentional investment seems rather arbitrary.
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Re: How much cash do you really hold?

Post by watchnerd »

Visitor76 wrote: Wed Apr 07, 2021 2:27 pm

I'm sorry, but if one losses their job having enough cash to buy the dip will be the least of their concerns.
Depends on how financially independent you are.

If one doesn't need to work anymore, it's less of an issue.

If we lose employment in the next 5 years during a crash, we'll just retire early and would use some cash to buy into a down market (per our IPS).
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Re: How much cash do you really hold?

Post by Soon2BXProgrammer »

barnaby444 wrote: Wed Apr 07, 2021 10:01 am So, conventional wisdom is to set aside an emergency fund (EF) in cash and then invest any other savings. Number of months of expenses to put in the EF and how to invest other savings in will of course depend on preference and situation. But *aside* from the EF (and any other short-term cash needs like a down payment or day-to-day checking), something I've always been curious about is what percentage of "investable assets," if any, do people actually hold in cash (e.g. high yield savings, CDs, sweep account in brokerage, etc.)?

For example, if you say your "portfolio" is 80% equities and 20% bonds, do you literally mean that you have zero cash other than the fixed dollar amount in your EF? Meaning, as your portfolio grows, you actually have a decreasing percentage of total net worth in cash?

Or, do you hold a percentage of cash on the side for peace of mind, to slightly dampen market volatility, to buy dips, or any other reason? And if so, do you call this cash part of your "portfolio"?
i am 75/25 and then i have cash... sometimes a lot (too much that don't like to admit) and sometimes less then what i actually want in my emergency fund.. So it varies over time. Why? i'm lazy. I like seeing 6 digits in my checking account. Its fun to go to the bank, and have them process a transaction and see it there...
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Re: How much cash do you really hold?

Post by watchnerd »

TheTimeLord wrote: Wed Apr 07, 2021 2:42 pm
watchnerd wrote: Wed Apr 07, 2021 2:39 pm
TheTimeLord wrote: Wed Apr 07, 2021 11:16 am I am always intrigued by the BH fascination with this mystical thing called cash. If your money is in something that generates a return it is invested imho. What BH like to call cash is just ultra short duration. So to me cash is what's in my wallet and anything held in a way that doesn't generate a return. That said by what I understand the BH definition of cash to be, the majority of my Fixed Income allocation likely would be considered cash or near cash. I currently see little or no value in holding intermediate or longer term Fixed Income assets. So I am currently erroring by holding increased equity and shorter term fixed income.
We can call it "short term reserves" like the Vanguard AA pie chart does if that helps.
Fine by me. People can call it anything they would like, but to think it isn't an intentional investment seems rather arbitrary.
I thought the purpose of the thread was to talk about the intentional part in a portfolio context.

Day-to-day liquidity to live life isn't something we count in our AA.

But we do count intentional "10% short term reserves" in our AA which is why they're in our signature.
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Re: How much cash do you really hold?

Post by watchnerd »

jason2459 wrote: Wed Apr 07, 2021 2:04 pm
Cash isn't the only component that I can tap into in a situation like that.
It's hard to buy six figures in stock in a down market on a credit card.
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Re: How much cash do you really hold?

Post by TheTimeLord »

watchnerd wrote: Wed Apr 07, 2021 2:45 pm
TheTimeLord wrote: Wed Apr 07, 2021 2:42 pm
watchnerd wrote: Wed Apr 07, 2021 2:39 pm
TheTimeLord wrote: Wed Apr 07, 2021 11:16 am I am always intrigued by the BH fascination with this mystical thing called cash. If your money is in something that generates a return it is invested imho. What BH like to call cash is just ultra short duration. So to me cash is what's in my wallet and anything held in a way that doesn't generate a return. That said by what I understand the BH definition of cash to be, the majority of my Fixed Income allocation likely would be considered cash or near cash. I currently see little or no value in holding intermediate or longer term Fixed Income assets. So I am currently erroring by holding increased equity and shorter term fixed income.
We can call it "short term reserves" like the Vanguard AA pie chart does if that helps.
Fine by me. People can call it anything they would like, but to think it isn't an intentional investment seems rather arbitrary.
I thought the purpose of the thread was to talk about the intentional part in a portfolio context.

Day-to-day liquidity to live life isn't something we count in our AA.

But we do count intentional "10% short term reserves" in our AA which is why they're in our signature.
It would seem different people view their portfolios in different ways. Which is probably the genesis for all the hand wringing around "cash".
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Re: How much cash do you really hold?

Post by watchnerd »

TheTimeLord wrote: Wed Apr 07, 2021 2:54 pm It would seem different people view their portfolios in different ways. Which is probably the genesis for all the hand wringing around "cash".
I think people are closeted about their short-term reserve holdings because it's considered a bit of a sin.

Admit you have "cash equivalents" in your port and you can expect barbs and darts about portfolio drag.

Which is why I think it's an interesting question in today's environment.

How much portfolio drag, relatively, are short term reserves / cash equivalents when bonds are offering negative real rates?
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jason2459
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Re: How much cash do you really hold?

Post by jason2459 »

watchnerd wrote: Wed Apr 07, 2021 2:51 pm
jason2459 wrote: Wed Apr 07, 2021 2:04 pm
Cash isn't the only component that I can tap into in a situation like that.
It's hard to buy six figures in stock in a down market on a credit card.

I was referring to becoming unemployed. Cash is just a part of what I could tap into. I have no concerns with using my cash reserves to buy more equities on sale. Or maybe I'm reading your post wrong

If I wanted to leverage into a dip it would be HELOC. Not that I would do that... If I was younger maybe. :twisted:
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Re: How much cash do you really hold?

Post by Broken Man 1999 »

watchnerd wrote: Wed Apr 07, 2021 2:51 pm
jason2459 wrote: Wed Apr 07, 2021 2:04 pm
Cash isn't the only component that I can tap into in a situation like that.
It's hard to buy six figures in stock in a down market on a credit card.
True. The only way I can buy equities in a down market is by selling bond fund holdings or exchanging some $$$ in Short-term Treasury Index MF for VTI, or VEA. Either way I don't need a stash of cash waiting to be used sometime.

Some investors could use margin, if their bond holdings are robust enough.

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Re: How much cash do you really hold?

Post by watchnerd »

Broken Man 1999 wrote: Wed Apr 07, 2021 3:06 pm
watchnerd wrote: Wed Apr 07, 2021 2:51 pm
jason2459 wrote: Wed Apr 07, 2021 2:04 pm
Cash isn't the only component that I can tap into in a situation like that.
It's hard to buy six figures in stock in a down market on a credit card.
True. The only way I can buy equities in a down market is by selling bond fund holdings or exchanging some $$$ in Short-term Treasury Index MF for VTI, or VEA. Either way I don't need a stash of cash waiting to be used sometime.

Some investors could use margin, if their bond holdings are robust enough.

Broken Man 1999
I like having multiple options.

If Treasuries don't hold up as well in the next crash, our 10% allocation to short term reserves can be tapped.

At current negative real returns on Treasuries, the opportunity cost of holding some cash as "the other risk free asset" is not particularly high.
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Re: How much cash do you really hold?

Post by manuvns »

5-6k cash and 50k in credit card debt with 0% intro APR.
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TheTimeLord
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Re: How much cash do you really hold?

Post by TheTimeLord »

watchnerd wrote: Wed Apr 07, 2021 3:00 pm
TheTimeLord wrote: Wed Apr 07, 2021 2:54 pm It would seem different people view their portfolios in different ways. Which is probably the genesis for all the hand wringing around "cash".
I think people are closeted about their short-term reserve holdings because it's considered a bit of a sin.

Admit you have "cash equivalents" in your port and you can expect barbs and darts about portfolio drag.

Which is why I think it's an interesting question in today's environment.

How much portfolio drag, relatively, are short term reserves / cash equivalents when bonds are offering negative real rates?
Very true and everyone has a right to their opinion. Just like my opinion is in the current environment carrying any meaningful duration is likely to lead to an undesirable result.
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Re: How much cash do you really hold?

Post by watchnerd »

TheTimeLord wrote: Wed Apr 07, 2021 3:13 pm Very true and everyone has a right to their opinion. Just like my opinion is in the current environment carrying any meaningful duration is likely to lead to an undesirable result.
Which is why I think this is an interesting tactical AA discussion.

We're loathe to add more bonds to our barbell as doing so would only increase duration.

Cash is a 'something else' we can do that doesn't add to the duration risk.

But it does nothing to improve the Sharpe ratio or efficient frontier of the portfolio, so evaluating currency hedges.

T-Bill vs 50/50 USD Bull / China Yuan Bull mix:

https://www.portfoliovisualizer.com/bac ... tion3_2=50

In the context of my portfolio, the backtesting shows improved CAGR, reduced volatility, improved efficient frontier, improved Sharpe and Sortino ratios, and no increase in duration.

Of course, backtests can be misleading.

And putting 4 years of living expenses into a currency hedge play is a bit daunting.
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Re: How much cash do you really hold?

Post by Broken Man 1999 »

watchnerd wrote: Wed Apr 07, 2021 3:10 pm
Broken Man 1999 wrote: Wed Apr 07, 2021 3:06 pm
watchnerd wrote: Wed Apr 07, 2021 2:51 pm
jason2459 wrote: Wed Apr 07, 2021 2:04 pm
Cash isn't the only component that I can tap into in a situation like that.
It's hard to buy six figures in stock in a down market on a credit card.
True. The only way I can buy equities in a down market is by selling bond fund holdings or exchanging some $$$ in Short-term Treasury Index MF for VTI, or VEA. Either way I don't need a stash of cash waiting to be used sometime.

Some investors could use margin, if their bond holdings are robust enough.

Broken Man 1999
I like having multiple options.

If Treasuries don't hold up as well in the next crash, our 10% allocation to short term reserves can be tapped.

At current negative real returns on Treasuries, the opportunity cost of holding some cash as "the other risk free asset" is not particularly high.
Problem I see with cash is you receive no capital gains.

If you look at bonds/bond funds over a short, recent interval, things can seem a bit ugly. However, much different look if you examine your bond holdings over a longer period of time. I play the long game. I don't worry about the leakage of dollars from my bond holdings, it is insignificant, in the grand scheme of things for our portfolio. We can easily survive a few nicks and scratches. None of my bond holdings have been fatally wounded, as the Monty Python comedy sketch declared, "It's just a flesh wound!" :D

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Re: How much cash do you really hold?

Post by watchnerd »

Broken Man 1999 wrote: Wed Apr 07, 2021 3:31 pm
Problem I see with cash is you receive no capital gains.

If you look at bonds/bond funds over a short, recent interval, things can seem a bit ugly. However, much different look if you examine your bond holdings over a longer period of time. I play the long game. I don't worry about the leakage of dollars from my bond holdings, it is insignificant, in the grand scheme of things for our portfolio. We can easily survive a few nicks and scratches. None of my bond holdings have been fatally wounded, as the Monty Python comedy sketch declared, "It's just a flesh wound!" :D

Broken Man 1999
We have an LMP ladder of TIPS/STRIPS. That's our income floor game.

For our risk portfolio, we use a barbell.

We have a decent allocation for LTT. That's our long game (along with equities).

That still leaves us 10-25% of our portfolio for our short / shorter end of the barbell.

And in the short game, T-bills pay jack right now so I don't feel bad about holding cash reserves or looking for alternatives.
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Re: How much cash do you really hold?

Post by watchnerd »

manuvns wrote: Wed Apr 07, 2021 3:12 pm 5-6k cash and 50k in credit card debt with 0% intro APR.
50k in CC debt?

Yikes.
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Re: How much cash do you really hold?

Post by manuvns »

watchnerd wrote: Wed Apr 07, 2021 3:45 pm
manuvns wrote: Wed Apr 07, 2021 3:12 pm 5-6k cash and 50k in credit card debt with 0% intro APR.
50k in CC debt?

Yikes.
that 50k in CC debt has returned 20-27% in last one year now getting ready to pay it off
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Re: How much cash do you really hold?

Post by FootballFan5548 »

I use Personal Capital, the website aggregating tool.

It lists bank accounts (including Money Market accounts) as Cash.
It lists everything else as Investments, including the cash I have at Vanguard or Merrill Edge.

I basically follow their lead in what I have in "cash" and what I have in investments.

In this case I have roughly $100k in cash, (admittedly high right now as we are starting the process of a kitchen reno), and I have $1.6M in investments, (this includes about $5K in Vanguard settlement fund).

I do not consider the cash portion as part of my investments at all, maybe I should, but I'm roughly 80/20 in my investments, and then I have a bucket of cash.
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Re: How much cash do you really hold?

Post by ruralavalon »

barnaby444 wrote: Wed Apr 07, 2021 10:01 am So, conventional wisdom is to set aside an emergency fund (EF) in cash and then invest any other savings. Number of months of expenses to put in the EF and how to invest other savings in will of course depend on preference and situation. But *aside* from the EF (and any other short-term cash needs like a down payment or day-to-day checking), something I've always been curious about is what percentage of "investable assets," if any, do people actually hold in cash (e.g. high yield savings, CDs, sweep account in brokerage, etc.)?

For example, if you say your "portfolio" is 80% equities and 20% bonds, do you literally mean that you have zero cash other than the fixed dollar amount in your EF? Meaning, as your portfolio grows, you actually have a decreasing percentage of total net worth in cash?

Or, do you hold a percentage of cash on the side for peace of mind, to slightly dampen market volatility, to buy dips, or any other reason? And if so, do you call this cash part of your "portfolio"?
We have zero investable assets in cash. We have no cash allocation in our portfolio, no savings account, no CDs, no money market fund, and no Stable Value Fund.

It varies but we usually have a couple months of living expenses in our joint checking account, used to pay normal living expenses as they are incurred.
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Re: How much cash do you really hold?

Post by watchnerd »

manuvns wrote: Wed Apr 07, 2021 3:48 pm
watchnerd wrote: Wed Apr 07, 2021 3:45 pm
manuvns wrote: Wed Apr 07, 2021 3:12 pm 5-6k cash and 50k in credit card debt with 0% intro APR.
50k in CC debt?

Yikes.
that 50k in CC debt has returned 20-27% in last one year now getting ready to pay it off
Lucky move.

But not a free lunch given you have to take future cash flows to pay it off.

Which I assume could have been avoided by not buying the 50k worth of stuff that got on your CC in the first place.
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Re: How much cash do you really hold?

Post by txhill »

I believe the higher your liquid net worth, and the more recession-proof your job / source of income, the less % of your total net worth should be in cash. The opportunity cost of holding cash is quite substantial. For example, if you had put $100k into VTSAX five years ago instead of holding it in cash, you'd have doubled the amount right now. So even with a 50% drop in the market, you'd be fine selling at a loss and recovering your cash then (and if that drop comes even later, you'd be even better off).

All this said, keeping at least a couple months' worth in expenses in cash is pretty sensible just for breathing room (and more if you have a job that is more likely to be affected by a recession). But I would recommend against sticking to a set percentage of cash.
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Re: How much cash do you really hold?

Post by Marseille07 »

jason2459 wrote: Wed Apr 07, 2021 3:02 pm
watchnerd wrote: Wed Apr 07, 2021 2:51 pm
jason2459 wrote: Wed Apr 07, 2021 2:04 pm
Cash isn't the only component that I can tap into in a situation like that.
It's hard to buy six figures in stock in a down market on a credit card.

I was referring to becoming unemployed. Cash is just a part of what I could tap into. I have no concerns with using my cash reserves to buy more equities on sale. Or maybe I'm reading your post wrong

If I wanted to leverage into a dip it would be HELOC. Not that I would do that... If I was younger maybe. :twisted:
It's not so much about tapping into cash, it's about protecting your equities AA from deep cuts. Having EF is one way to achieve that, but not the only way.
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Re: How much cash do you really hold?

Post by jason2459 »

Marseille07 wrote: Wed Apr 07, 2021 7:09 pm
jason2459 wrote: Wed Apr 07, 2021 3:02 pm
watchnerd wrote: Wed Apr 07, 2021 2:51 pm
jason2459 wrote: Wed Apr 07, 2021 2:04 pm
Cash isn't the only component that I can tap into in a situation like that.
It's hard to buy six figures in stock in a down market on a credit card.

I was referring to becoming unemployed. Cash is just a part of what I could tap into. I have no concerns with using my cash reserves to buy more equities on sale. Or maybe I'm reading your post wrong

If I wanted to leverage into a dip it would be HELOC. Not that I would do that... If I was younger maybe. :twisted:
It's not so much about tapping into cash, it's about protecting your equities AA from deep cuts. Having EF is one way to achieve that, but not the only way.
My equities would be lower on the list of what I tapped into.
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Re: How much cash do you really hold?

Post by manuvns »

watchnerd wrote: Wed Apr 07, 2021 5:10 pm
manuvns wrote: Wed Apr 07, 2021 3:48 pm
watchnerd wrote: Wed Apr 07, 2021 3:45 pm
manuvns wrote: Wed Apr 07, 2021 3:12 pm 5-6k cash and 50k in credit card debt with 0% intro APR.
50k in CC debt?

Yikes.
that 50k in CC debt has returned 20-27% in last one year now getting ready to pay it off
Lucky move.

But not a free lunch given you have to take future cash flows to pay it off.

Which I assume could have been avoided by not buying the 50k worth of stuff that got on your CC in the first place.
didn't buy stuff with CC mostly balance transfer during COVID offers
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Re: How much cash do you really hold?

Post by RNJ »

We keep a little bit over one month's worth of expenses in our checking account, which is not-quite drawn down through the month and replenished the following month.

The fixed income portion of our taxable investment account is divided between a short-term treasury ETF and an intermediate-term tax-exempt bond fund, roughly 1:4.
index2max
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Re: How much cash do you really hold?

Post by index2max »

I am holding about $100k in high-interest deposit accounts at credit unions as my save-for-house/emergency-savings fund. Government bonds don't pay much and big corporations like Apple can easily refinance their corporate debt at these near-zero interest rates. Plus the government can print money to drive the spending power of bond coupons into oblivion.

If the market tanks again, I can spend some of my interest money buying into the stock market while yields are temporarily high during a panic like in Dec 2018 or March 2020. I like to think of myself as a little Buffet :beer
hulburt1
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Re: How much cash do you really hold?

Post by hulburt1 »

68 have 180000 in cash MM and saving. 1.1m in S&P 500 and Apple. IRS and 222000 in Roth IRA. no bond never have or will.
I live on 50000 year. That cash covers me to SS and then RMD. :sharebeer
pascalwager
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Re: How much cash do you really hold?

Post by pascalwager »

Currently, I have $17k in an online bank HYS account and another $20k in a local bank checking account. The checking account is often lower as I pay bills.

I also have another $5k in a joint "bridge" bank account for an heir/dependent.
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watchnerd
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Re: How much cash do you really hold?

Post by watchnerd »

manuvns wrote: Wed Apr 07, 2021 10:04 pm
didn't buy stuff with CC mostly balance transfer during COVID offers
Well you got 50k of debt buying something somehow somewhere sometime
Last edited by watchnerd on Thu Apr 08, 2021 12:16 am, edited 1 time in total.
60% Global Market Stocks (VT,FM) | 15% Long Treasuries 15% short TIPS 10% currencies / cash || RSU + ESPP | LMP TIPS/STRIPS
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dmcmahon
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Re: How much cash do you really hold?

Post by dmcmahon »

MrJedi wrote: Wed Apr 07, 2021 10:06 am I include cash as part of the fixed income/bonds part of my portfolio. To me this is a more accurate reflection of risk. Otherwise somebody with $1000 in stocks, $0 in bonds, and $1MM in cash could say they are 100/0 allocation...I don't think that is an accurate representation of the risk they are taking.

Exception would be cash set aside for an upcoming and planned purchase. I consider that already "spent".
Me too. Officially I have it at 5% of my portfolio, and that includes the EF. I'm uncomfortable if I don't have about a year's worth of expenses in cash or cash equivalents. My bond ladder assures me of fresh infusions of cash annually, should I need them; if not, they're rolled out to the end of the ladder. I don't reinvest dividends so there is also fresh cash flowing in to partially offset what goes out.
Marseille07
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Re: How much cash do you really hold?

Post by Marseille07 »

MrJedi wrote: Wed Apr 07, 2021 10:06 am I include cash as part of the fixed income/bonds part of my portfolio. To me this is a more accurate reflection of risk. Otherwise somebody with $1000 in stocks, $0 in bonds, and $1MM in cash could say they are 100/0 allocation...I don't think that is an accurate representation of the risk they are taking.

Exception would be cash set aside for an upcoming and planned purchase. I consider that already "spent".
Extreme examples can be drawn, but imo it doesn't make a huge difference in most cases. What's the point of barking at someone that they're 99.5/0.5 rather than 100/0?
jsapiandante
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Re: How much cash do you really hold?

Post by jsapiandante »

Our cash is part of our fixed income. I always have at least 3 months of expenses in our checking account. This represents about 1.5% of our portfolio. Since we are still in accumulation phase, any extra cash left over after monthly expenses is invested per our AA every quarter. We don’t have an EF. At a certain point we decided to look at our whole portfolio as our EF. Our taxable has grown to 10 years expenses. Even after a big market drop we can still get by for several years.
SnowBog
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Re: How much cash do you really hold?

Post by SnowBog »

We also include cash in our fixed income AA. Ultimately money is fungible, so I don't see the point in ignoring part of it or treating it differently. As others pointed out, cash is just an ultra short term investment. Our $ is our "sleep well at night" number, especially when viewed as part of our 60/40 AA (we are 45, planning for FIRE before 55).

I encourage others to find the SWAN settings - for some that's maintaining a separate EF, others is $0 cash, and many more variations...

While I can represent cash as a % of portfolio, we don't maintain it as such. Instead I keep between 3 - 12+ months in savings/MM accounts (reduced by redeemable I Bonds, but not less than 3 months in savings/MM). The actual % decreases as our net worth increases.

As we get closer to retirement, our plan is to grow to 3 years of expenses in savings/MM (will be more than 3 years if you include I/EE Bonds, etc.). Haven't decided if we'll maintain this amount of cash, but I want to start there for extra flexibility to manage "income" for taxes/ACA subsidies/etc.
Last edited by SnowBog on Thu Apr 08, 2021 1:36 am, edited 1 time in total.
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TierArtz
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Re: How much cash do you really hold?

Post by TierArtz »

I keep 1.5% cash as part of the family portfolio. Basically, I make sure I have enough in checking to cover the Visa bill, mortgage, and smaller expenses; I've kept a couple of thousand in savings for rare transfers back to checking when minor cash flow events occur. Most of what I consider cash is in a VG MM account - used to fund IRAs in early Jan and serves as an emergency fund. When the MM account amount gets excessive, I'll invest in stock or bond indexes in taxable.
hudson
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Re: How much cash do you really hold?

Post by hudson »

My plan is to hold $20K in a high yield savings account to solve unexpected problems.

I like for the money to be available on the same business day. Amex Bank does that.

Do I count it as part of my portfolio? yes

I'm making .5% on the $20K; I could be making 2% (federal tax free!) in a muni fund, so it costs me, $300 a year. Ouch, that's a lot for peace of mind and convenience.
Maybe I'll dump it all back into the muni fund?
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billthecat
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Re: How much cash do you really hold?

Post by billthecat »

I view "cash" as anything that is not marked to market (checking balance, savings, money market, I Bonds, etc.).

I first take off the top 1 year of expenses, less estimated dividends and interest, in cash. Then, for the remaining portfolio, I have my age - 10 in fixed income, of which 7/8 is total bond and 1/8 is "cash". So if I were 50, that would be:

60% equity
35% bonds
5% cash

Topping out at 75% fixed income (at age 85).

I'm interested in any thoughts anyone might have on that approach.
We cannot direct the winds but we can adjust our sails.
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