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Dry powder? - rayray - 05-16-2015
Question for you guys:
How much if any dry powder do you keep in your accounts for future investing? Kplan? IRA? and Brokerages?
I'm not thinking about cash for a rainy day, I'm thinking about the cash reserves used for a dip purchase.
Personally, in my kplan I have ZERO cash, all monies are allocated on weekly buys.
My IRA is around 1 percent and my brokerage is around 4 to 5 percent.
I'm thinking about putting future dollars in my kplan towards cash in order to buy on a dip. I keep thinking there will be a dip sooner or later but I've been thinking that since 12000/13000.
Since I don't panic and sell during bad markets being fully vested has seemed to work fine. But as I accumulate I wonder if cash reserves should be considered? Thoughts? What do you guys do?
RE: Dry powder? - DividendsandTea - 05-16-2015
Try to keep around 5% on hand in case of opportunities and pull backs.
RE: Dry powder? - crimsonghost747 - 05-16-2015
I have a cash account that serves as rainy day fund / saving for downpayment for house / cash reserve for dips. All those 3 put into one as I feel comfortable using this cash for any of the 3 activities mentioned above. It's got quite a lot of cash mainly since I think buying a house could be in the plans during the next 5 years. I am not ready to withdraw everything and throw it into stocks but I can do that with quite a large percentage if the dip is strong enough.
So lots of dry powder ready if necessary, but it's not sitting there for the sole purpose of being used on the stock market.
Also IB offers margin (up to 50% of portfolio's value) for a very good % so that can also serve as ammo if necessary.
RE: Dry powder? - earthtodan - 05-17-2015
I usually have a few % in cash. I spend a decent part of each day doing research and watching the market looking for a good deal. Not long ago I decided that sitting on cash might be driving me a little crazy, and if i just got 100% invested I would be able to unplug from the market a bit and reclaim some mental bandwidth for other things (like work).
After getting 100% invested, and with the market continuing to push new highs, I started getting anxious about not having any cash in case of a pullback, and I started looking for opportunities to skim off the top of positions that had become overvalued or run up too large.
Conclusion: Investing will drive you crazy.
RE: Dry powder? - rayray - 05-17-2015
Oh man!! Yes, it's extremely hard for me to sit on cash!! Looking to work for another 20 years I'm still very much in the accumulation phase and never looked at a market downturn as something bad. I've lived through two as an investor--the dot com bust and then of course the financial crisis of 2008/09. The dot com bust threw my Janus funds into a tailspin but I basically ignored the financial crisis as a lot my friends panicked and sold. I held on tight and sadly passed a lot of friends that have 10 plus years on me in the market, two that have finance degrees.
I have very little in cash reserves in case of a dip, maybe 2%.
I'm not including my home emergency cash reserve, that doesn't count for what I'm talking about, for me at least.
Taking some advice here, I'll try to push the cash reserves up to 5%. I'm not sure I can do it--it's like I'm an addict or something in this department.
RE: Dry powder? - crimsonghost747 - 05-18-2015
I feel your pain guys. It simply feels horrible to have large amounts of cash. Having all that money sit in an account gathering a ridiculously low interest rate compared to having it in the market bringing in a decend dividend yield... just feels like wasted money.
If you have no short term needs for the money and you are willing to use some leverage to buy the dips, then I wouldn't necessarily see a need for keeping any cash for investments needs.
Only reason my cash balance is big is, like I said, I plan on buying a house/apartment sometime in the next few years and I do not plan on selling any shares to finance it. If the market wouldn't be so highly valued I wouldn't mind investing a bit of that cash but at the current levels I feel like it's too risky. As my plans for the next couple of years have become more and more clear I'm looking to park a part of that cash into bonds with maturities in the next few years. This way I will get the capital back before I need it and get to enjoy some higher income than I would from a simple cash account.
RE: Dry powder? - hendi_alex - 05-18-2015
10%-25% opportunity cash. Usually used for active trading, but from time to time used to buy a bargain for long term hold.
RE: Dry powder? - EricL - 05-18-2015
Nearly 100% of my investable cash is deployed at all times. I have another 25 years until retirement; I want my money working for me. If there is a big pullback I will buy more as new funds hit the account and dividends are reinvested.
RE: Dry powder? - Kerim - 05-18-2015
(05-16-2015, 10:13 AM)rayray Wrote: I'm not thinking about cash for a rainy day, I'm thinking about the cash reserves used for a dip purchase.
(05-16-2015, 12:47 PM)crimsonghost747 Wrote: I have a cash account that serves as rainy day fund / saving for downpayment for house / cash reserve for dips. All those 3 put into one as I feel comfortable using this cash for any of the 3 activities mentioned above.
I'm with crimson here, I like keeping a big pile of cash handy, and am comfortable using it for various purposes. Philosophically, it is primarily my rainy day fund. But I am more than happy to raid it to take advantage of a nice opportunity in the market. If I do that, I'll take care to replenish the fund going forward.
(05-17-2015, 05:23 PM)earthtodan Wrote: Conclusion: Investing will drive you crazy.
Lol.
(05-18-2015, 01:38 AM)crimsonghost747 Wrote: It simply feels horrible to have large amounts of cash. Having all that money sit in an account gathering a ridiculously low interest rate compared to having it in the market bringing in a decend dividend yield... just feels like wasted money.
I disagree on this one -- cash is king! Having a large pile of cash makes me feel so warm and happy! I understand the arguments in favor of staying fully invested (or nearly so), but my temperament dictates otherwise. (I think the very first rule of investing is "know thyself"!)
RE: Dry powder? - ChadR - 05-18-2015
Like EricL, I'm also 100% invested. As soon as my cash hits around $1,200, I'm buying what is most attractive. Dividends are reinvested in the company.
RE: Dry powder? - Dividend Watcher - 05-19-2015
I don't leave much cash in the account but sometimes I'm waiting for something to get closer to my price. Since I don't have a regular stream of cash pouring into the account, I'd rather wait for the right price provided it's not measured in years. That being said, I have about 1.5% in my account and my wife has less than 1% in cash. Both are waiting for the limit orders to trigger.
RE: Dry powder? - Caversham - 05-19-2015
With the lofty market, I currently save about 1/2 of my monthly "DGI money" in cash and the other 1/2 is invested.
It is very rare that DGI staples go on sale, and when they do I want to be ready to buy some. If the market pulls back significantly, I would burn through all of my cash and save nothing buying these companies.