A Fool's Follow-up

I was contacted by email, asking for a follow-up to “A Fool’s Confession” where I mentioned I had gone to all cash.

Bottom line summary:

  • I partially bought back in. I’m only 32% cash now. I thought maybe the bottom could be in but I was wrong. It ended up dropping further recently. Still, of the money I have invested, I bought back in for less than I sold so I can view that as a success (most of the money is in IRAs, no tax effect buying/selling).

  • The reason for my continued large cash stake is simple. I think there is a “reasonable chance” we will see dark times ahead in both the market and the economy and it is mostly for what appears to be the upcoming recession that I have the cash. I am in a much different situation than many. For now, a lot of folks are not working and are at home. Most of you will go back to work. I will not. I will remain retired. And if the market remains tanked for an extended period, I will definitely need that cash… which now represents a good number of years of spending.

I’ve cut back our spending. Travel restrictions took care of our planned Hawaii trip and I suspended one stream of discretionary spending. There is more discretionary spending that could be cut, but I will resist that.

My point is to protect for “a really bad scenario” because when you’re retired, there is no more money coming in. I’m willing to give up some upside to protect for an unusual downside. If this were a “normal” market correction, I don’t think this would be necessary but this is a very unusual circumstance where the US… and much of the world… is sort of in the midst of a heart attack. How well will the heart start back up? Nobody knows… we could come roaring back, we could face a very protracted down period. I think we’ll come back pretty fast. But I won’t “bet our lives” on it. :slight_smile:


My holdings are in my profile, which can be found by clicking on my Fool name above. Our current portfolio represents MOST of what I want to own, but not all of it. These are the companies I want to own but haven’t bought yet: LVGO, PAGS, SHOP. They had really low lows, but I didn’t act unfortunately. I’d also like more TTD than I have. It was really low recently but I may get another chance if there is another big drop.

For now, the focus is divided: 1) Participate in some of any recovery with our current holdings, 2) retain excessive cash for any worst case scenario. I am reducing my potential returns, but that is OK. It is more important to have enough to live on than it is to run up the portfolio value.

On another note: It seems like this board recently became the ZM board :wink: and you’ll notice I didn’t mention ZM. I think ZM may be a good investment, but no investment is worth “ANY price”. As prices go higher and higher, the future returns decline. Bottom line: There are MANY good companies out there, I don’t need to own them all… and I don’t need to chase the price up on “the latest hot thing”. As time has passed, I see concerns have developed. Maybe those will be addressed, maybe not. But I’m not in any hurry to add ZM to my wish list… although I’ll be watching. Maybe I’ll change my mind sometime.

Whoops! Almost forgot! Backing out of the market entirely gave me the chance to re-assess my approach. I’ve shifted a bit to put more money into long term success stories and not just the TTDs of the world. That resulted in good size positions in MELI and PAYC. They are, of course, exposed to Corona concerns but I see them as being able to continue to grow well for many years. Especially MELI. I’ve toyed with buying PYPL as well, but I’m reluctant to have much money tied up in companies with market caps over $100B. Might buy anyway because they should continue to do well.

That’s it for now…

Rob
Rule Breaker / Market Pass / Supernova Starshot Home Fool & STMP/MTH Maintenance Coverage Fool
He is no fool who gives what he cannot keep to gain what he cannot lose.

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Rob,

Thank you for your post. I too am retired and switched over to Saul’s approach last August. I also have gone more cash in the past week, now 12.5%, and have been aware that this outside the knowledgebase, of staying fully invested.

The issue for me is I am heavily invested in only 5 stocks and don’t want to increase the risk profile by further investing in these.

By looking at your profile page, I am reminded of further possibilities but will keep my powder dry for the moment.

Best Regards,
Bruce

AYX
CRWD
DDOG
CASH
OKTA
ZM

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