09-01-2013, 12:36 PM
Things are a little scary right now and not a single person in Washington gives a rat's a$$ about anything so yeah I think some cash is a good idea to get you to the right comfort level.
OTOH there's a lot of good stocks 10%+ off their highs to be looked at. Some with dividend increases looming like PM, MSFT, WMT, BP, MCD to name a few.
With some recent nibbling I'm at 14% cash and that's about as low as I'm going with things the way they are right now. I have been 100% invested a few times over the years and it's a good thing to have all your money working and it's a good thing to be all-in when stocks are cheap and everybody hates them.
I guess I don't think we're going to make a big move down from here but that could all change tomorrow for any number of reasons. So some cash is certainly appropriate if you don't like what you're seeing out there.
One thing about being 100% invested though is it takes away some flexibility because you have to sell something to buy something. I don't like being boxed in like that so I keep some cash on hand, at least enough to make a meaningful difference in a few positions if a good opportunity popped up.
It costs you though because you get doodly on cash and you could be in a solid 3.0% stock like JNJ or PG and not have much to worry about. Shoot you could even think of a handful of stocks of that dividend quality as a Money Market with a little beta attached, if you can buy them right.
Take your total cash x 3% and divide by 12 and that's how much it costs you a month to hold that cash. If you get up to 25%-30% cash the cost is significant.
So you have to decide whether you can afford to hold cash and how much of a boat anchor you want on your portfolio. And you have to figure out whether you can make that cash pay off in the future and if you have the guts to deploy it at opportune times, if you get them.
OTOH there's a lot of good stocks 10%+ off their highs to be looked at. Some with dividend increases looming like PM, MSFT, WMT, BP, MCD to name a few.
With some recent nibbling I'm at 14% cash and that's about as low as I'm going with things the way they are right now. I have been 100% invested a few times over the years and it's a good thing to have all your money working and it's a good thing to be all-in when stocks are cheap and everybody hates them.
I guess I don't think we're going to make a big move down from here but that could all change tomorrow for any number of reasons. So some cash is certainly appropriate if you don't like what you're seeing out there.
One thing about being 100% invested though is it takes away some flexibility because you have to sell something to buy something. I don't like being boxed in like that so I keep some cash on hand, at least enough to make a meaningful difference in a few positions if a good opportunity popped up.
It costs you though because you get doodly on cash and you could be in a solid 3.0% stock like JNJ or PG and not have much to worry about. Shoot you could even think of a handful of stocks of that dividend quality as a Money Market with a little beta attached, if you can buy them right.
Take your total cash x 3% and divide by 12 and that's how much it costs you a month to hold that cash. If you get up to 25%-30% cash the cost is significant.
So you have to decide whether you can afford to hold cash and how much of a boat anchor you want on your portfolio. And you have to figure out whether you can make that cash pay off in the future and if you have the guts to deploy it at opportune times, if you get them.