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I am almost fully invested. With just 1% of my portfolio in cash, I find myself caught with missed opportunities.
I know that most of my money is working to its full potential by staying invested in companies but at the same time, I find that quick overreactions in the market (such as today's 2% drop in BNS) means that I am left on the sidelines. As we go into a new year, I am hoping to have a bit more room to move in on new opportunities when they present themselves.
While missing a 2% drop in stock price is a missed opportunity nonetheless, I would regret if there was a 10% drop in the market and I couldnt take advantage. I feel a cash position of 5-10% of my portfolio will provide me with that ability. Out of curiosity, do you have a target to maintain a cash position in your portfolio?
I keep little to no cash in my account. Will I occasionally miss some opportunities? Absolutely. Though I feel that being completely invested at all times is better since I don't lose out on having my money sit idle and get me 0.1% interest.
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I am always near 100% invested, as soon as I build up enough deposits to make another purchase, the buy is made. I may miss out on a few pullbacks, but with constant reinvestment of dividends I still get to take advantage of lower prices. Meanwhile, my capital is always working for me.
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Cash is king, baby!
I always keep a pretty good chunk of cash around, but I'm not sure that tells the whole story about fully versus not fully invested. I am a pretty big believer in the "emergency fund" concept, and having a big pile of cash in a savings account gives me significant peace of mind. But I am happy to have that amount wax and wane, and if we saw a significant pullback that presented lots of great buying opportunities, I would not hesitate to raid the "emergency" fund to buy great companies on sale. So there is generally not too much spare cash just sitting around in my brokerage account that is already earmarked for investing, but I do have a significant amount of cash that I also consider as "dry powder" in case opportunity knocks.
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Kerim, I am referring specifically to the cash position in my portfolio. I hold enough cash in my emergency fund. However, i do not consider this to my cash for investing purposes.
Thanks for the feedback, anyway.
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Yeah, I keep an emergency fund of cash for the household, but all investment capital is deployed as it is deposited into my accounts.
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R2R
I keep anywhere from 10% to 25% in cash for the reasons you cite. One would think that holding cash would be a drag on the portfolio, but I trade partial positions of my holdings, such that trading income is 1x to 3x greater than my dividend income. I can only accomplish this by holding cash. I consider buy and sell when there is a deviation of >10% in a partial position. 10% down consider buying a partial position, 10% up on last partial positon, consider selling a partial position (I always consider capturing the dividend if possible). Most of my holdings are dividend achievers and dividend aristocrats.
M$$I
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(12-05-2014, 02:31 PM)Roadmap2Retire Wrote: Kerim, I am referring specifically to the cash position in my portfolio. I hold enough cash in my emergency fund. However, i do not consider this to my cash for investing purposes.
Thanks for the feedback, anyway.
(12-05-2014, 03:03 PM)EricL Wrote: Yeah, I keep an emergency fund of cash for the household, but all investment capital is deployed as it is deposited into my accounts.
I guess I'm just saying that I don't draw a super-bright line between the two. Strictly speaking, I am more or less fully invested, if you look at the funds that I keep specifically earmarked for investing. But I take comfort in having some dry powder available so as not to miss great opportunities should they arise.
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I'm finally down to 0.3% of my portfolio in cash with my last purchase. I'm sure I'll miss some opportunities in a big market swoon but at least the dividends could get reinvested at a better price.
I recently turned off reinvestment on some of my overweight or overpriced companies with the intent to build a big enough cash pile to add to a current holding or initiate a new position. Once I have sufficient funds, it will gt invested.
The only time I've held cash for any length of time is when trying to decide where to invest it.
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“While the dividend itself is merely a rearrangement of equity, over time it's more like owning an apple tree. The tree grows the apples back again and again and again, and the theoretical value of the tree doesn't change just because of when the apples are about to fall.” - earthtodan
I only have cash in my account when I don't have enough to make another "commission friendly" purchase.
I usually make a purchase 1-2 days after I have enough cash (either from Dividends or by adding funds) to make the commission reasonable (usually $1000+).
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I have been adding to my positions in XOM, COP, OXY, T, VZ, and KO the past few days. Holding a cash position is allowing me to add to my dividend achiever and dividend aristocrat positions at favorable valuations.
M$$I
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Good stuff, MSSI. I am sitting on the sidelines with a bare minimum in cash. I dont think I will be investing anything for teh rest of 2014. New investments will have to wait another month or so.
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