I have had little to offer on this board because I started trading my bonds for cash over the last two years and came into the year with roughly 1/3 cash and 2/3 ltbh equities.
So….what good is the oversized cash position if I have no idea when and how to deploy it?
My present plan is to remain overweight cash if the markets pivot or bounce off the lows of last June because the cash was intended to serve as a hedge against a deep and sustained crash early in my retirement.
If it breaks through the lows of last June I may start averaging in slowly or I may stay significantly overweight cash until next February to see if the Fed sticks to its Guns.
I can relate. Every time I get to a large cash position, say 15% or more, I usually don’t hold it long for many of those reasons you state. Will I know when to get back in? So then I start deploying some and within a week I might be down to under 5% again.
But if you are early in retirement, as you said, I think I’d want a large cash cushion. Like, constantly. All the time. How much is dependent on each person’s circumstances. But I would want a lot of cash so that if markets tank I can live off cash, not sell securities on the cheap. Then wait for the rebound and use that to slowly re-fill the cash cushion.
Best timing I ever did was go 100% short term treasuries in the summer of 2008, due to the information collected on this board.
I have been cash heavy since mid 2016, due to risk being off the scale.
Added back some more equities in 21. Started shifting back to cash a few months ago.
WHR sold at $188.09. Close today 157.80
Parker Hannifin sold at 271.11. Close today 269.61
Coke sold at 62.25. Close today 62.15
3M sold at 155.98. Close today 124.86
Kimberly Clark sold at 120.78 Close today 128.83
J&J sold at 163.40 Close today 162.43
The J&J and 3M went due to the risk of their “novel” tactics for fobbing off liability. WHR due to economic outlook and expiration, next winter, of the protectionist tariff against Korean washers. Parker due to economic sensitivity. Kimberly, due to things I didn’t like on their latest balance sheet. Coke, due to economic sensitivity: store brand pop is cheaper, and one shelf down from Coke product.
Cash isn’t returning much. Due to the flat yield curve, I’m keeping most of my cash in short-term T-bills which I buy at auction. Every little bit helps.
I’m not ready to go long on stocks yet but I have a bunch of T-bills maturing in October, November and December. Right now the stock market feels like a falling knife.
I’m not sophisticated enough to play with options so I’ll take the low-risk way.
Sticking with cash till opportunities present.
Currently I’m about 50% cash (and short T-Notes).
So here’s where people split off. We live well below our means and, I rationalize that the dividends of the equities we own more than cover our operating expenses. It’s a rationalization because, if I had gone to cash at the end of last year (as I was tempted to), I would have paid a pile of taxes, but likely (I haven’t bothered to check) even paying the taxes and giving up the income, I still would have been ahead of the game from the standpoint of the pile of “free” capital.
People are talking like our economy will either tank or pull out in a matter of months, I suspect this will be (depending on external geopolitics as well as domestic politics) at least a year and possibly longer. There is no reason to do either panic buying or selling as we are not yet to the mean value of stocks or bonds and there is likely a lot more blood to let.
I’m pretty much in the same boat. Retired a few years ago, DW due to retire next May. Financial advisor says we need 3% average ROI for our investments to maintain our standard of living.
We’ve been in 85% Cash portfolio for the past 2 years unable to justify the current high PE - and waiting for the BIG BUST. Looks like it might be coming later this year, maybe next year. These things sometime take years to play out. I’m in no hurry to get back into the market. We may be losing to inflation now, but think that this is only temporary while we wait it out.
In the meantime, we have purchased I-Series Savings Bonds up to the limit, and have also just purchased some Treasury Bonds for a little jolt in rates. We still have plenty of dry powder remaining for easing back into the market when we think it’s a more prudent level.
I’m watching the mungofitch-99 Rule for re-entry and will most likely dollar cost average back in.