Opportune cash on hand
Moderator: Aitrus
Opportune cash on hand
Not too long ago, I read an interesting interview on Mark Cuban. He was talking about people's misconceptions of always having to have their money invested, having it work for them. He said cash on hand can be a smart move, readily available in the case of a market pullback. Now I realize this isn't a groundbreaking theory here, I get it. Buy low sell high. I guess I was flawed in that way of thinking, extra cash on hand being a bad thing.
While, I'm maxed out in the TSP, waiting for a dip for future investments. Waiting is a bad way of saying it lol. Keep the rally going!!!
Any thoughts on how long the train will keep chugging along? Thanks.
While, I'm maxed out in the TSP, waiting for a dip for future investments. Waiting is a bad way of saying it lol. Keep the rally going!!!
Any thoughts on how long the train will keep chugging along? Thanks.
Re: Opportune cash on hand
But what if the market climbs 20% before crashing 15%, and then you decide to buy?
Owner/creator of TSPcalc.com - "Know your numbers"
Re: Opportune cash on hand
I agree about cash on hand, CASH is king you can get some great deals if you have cash on hand. I buy and sell two or 3 cars a year older cars that is. I always get good deals because I can offer cash on the spot. Lets call this my mad money, but before I kept cash on hand I made sure I was maxing out everything else.
Re: Opportune cash on hand
Of course sitting around waiting for a trough can have it's own opportunity cost.
Re: Opportune cash on hand
Why wait for the fish to bite when you can jump in and grab one? I hate fishing, but a man has to eat!
Re: Opportune cash on hand
This question comes up now and then. Here's my response to the last time somebody asked about it:
Doc-Rush,
I did a short study a couple of years ago on the plusses and minuses of contributing under different scenarios. In short, here's what I found out: mathematically, you end up paying less per share if you build up a stockpile of money in the G Fund and buy in when prices fall a lot. You end up paying a lot less per share, but it only works with small accounts.
The problem with this scenario is that it can be quite a long time before you get a fall in prices deep enough to justify buying in with your saved up funds, and the stockpile needs to be big. In the meantime, that money has been sitting in the G Fund, earning next to nothing. And while your money has been sitting, the market likely has risen so far that even a significant pullback of 10% or more simply takes the prices back to the point where you first started putting money into the G Fund. So while you pay less per share, you also end up missing out on earnings during bull markets.
Then there's the size of the account. The larger the account, the less the saved cash makes a difference in the numbers. In the end, the math says that the difference to a large account is so small as to be a wash. Mathematically, the strategy of saving money for a large purchase of stocks during a pullback works only when the amount of cash to buy more stocks at a discount is around 5% of the total value of the account and the stock pullback is at least 12%. If either figure is smaller, the math says it's not worth your time and emotion of saving the money and deciding when to buy in.
My advice for a seasonal investor: just match your contributions to the seasonal pattern. It's the best balance of dollar-cost-averaging and time management.
Seasonal Musings 2022: viewtopic.php?f=14&t=19005
Recommended Reading: http://tspcenter.com/forums/viewtopic.php?f=14&t=13474
"It's not what happens to you, but how you react to it that matters" Epictetus
Recommended Reading: http://tspcenter.com/forums/viewtopic.php?f=14&t=13474
"It's not what happens to you, but how you react to it that matters" Epictetus
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Re: Opportune cash on hand
That is partially why many advisors and general investing advice is to have 5-10% invested in bonds. When the market takes, you rebalance, and use parts of your bond money to buy (cheaper) stocks. Other benefits include making your overall portfolio much less volatile, even with just 5% in bonds.
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Re: Opportune cash on hand
Use cash to support margin in non-IRA brokerage account to earn 5% annually selling OTM puts on blue chips while waiting for the next market correction to buy those depressed blue chips for resale after the market recovers. No margin fees unless stock is assigned; no risk until you own stock; no reduction of margin limit as stock (purchased with cash) appreciates during market recovery, better than bonds.
mo meng, mo ching (which loosely means: no money, no life)
Re: Opportune cash on hand
I am a fan of the index funds that have a huge spread. Less volatility, as we know black swan market events are not predictable.
Re: Opportune cash on hand
I think it sounds like a good idea to have some cash and liquidity in your strategy. Depends on what your goals and risk tolerance are, I suppose. I like the idea of being able to spend a little cash when others can't or at my discretion. I wish I could go back to before 2008 with cash sitting around so I could have picked up good deals on real estate (no offense to those who suffered from the mortgage crisis, it was awful for so many people). I try to think like that now and prepare myself for a time when cash/very liquid assets will be needed. It's more like insurance than an investment.
Fund Prices2024-03-27
Fund | Price | Day | YTD |
G | $18.14 | 0.01% | 1.00% |
F | $19.09 | 0.26% | -0.68% |
C | $82.11 | 0.87% | 10.42% |
S | $82.19 | 1.48% | 6.61% |
I | $42.68 | 0.56% | 6.21% |
L2065 | $16.38 | 0.84% | 8.36% |
L2060 | $16.38 | 0.84% | 8.36% |
L2055 | $16.39 | 0.84% | 8.36% |
L2050 | $32.73 | 0.71% | 6.94% |
L2045 | $14.91 | 0.67% | 6.56% |
L2040 | $54.37 | 0.63% | 6.20% |
L2035 | $14.34 | 0.58% | 5.77% |
L2030 | $47.66 | 0.53% | 5.35% |
L2025 | $13.14 | 0.31% | 3.40% |
Linc | $25.60 | 0.24% | 2.79% |