"RE :We are in a fairly good position. Have been retired for about 10 years although only 63. Started transitioning our portfolio about 8 years ago to be an income producing portfolio. We have about 20% of our portfolio in cash (treasuries, CD's and Money Markets), enough for about 5 years of expenses. The rest produces income for us."
This is pretty much our position as well. We are 80% equities, 20% cash, our cash is liquid tho, 5.25% HYSA and we dont have CDs or other cash instruments. I personally love the 5+ years or so expenses in cash, especially since it's actually earning decent now. That allows me to continue to also feel good about the income producing equity portfolio that currently pays our bills.
"I have been handling our investments for the last 12 years and my husband has only recently, last few months, taken an interest. He feels that we should go to cash. I have spent the last 8 years building the income and do not want to go to completely cash. When DC over at SA posited that perhaps going to cash and repurchasing after a market crash I was interested in the replies but no one took him seriously. When I saw the tzandig reply here I was curious what he had to say as well as the opinions of anyone one else on this board. We have compromised so far in that we are no longer reinvesting dividends."
My wife has been the same over the past decade. Not much interest, but every once in a while (driven by some sort of huge news story), pops in to have an interest. She's popped in regarding gold, bitcoin, cash, etc. over the years. At that point we sit down and I try to re-explain the DGI strategy, the nest egg, reliable increasing income no matter a stocks/or market pricing, the balance of equities and cash. Also, it's best to be buying into a down market, more shares, more income.
I personally am just not a fan of market timing in that way. I market time almost ALL of my individual equity purchases based on various valuation methods...but timing the entire market? Moving in and out of the market in whole? That scares me a bit, maybe even more than a bit.
The other thing for me is, buying a cash asset means the value never goes up. It might throw off good income at the moment (which is very nice) but you put in $100K, that's what you are getting back + interest.
With high quality equities that pay an increasing dividend, you not only have reliable and increasing cash flow, you stand a pretty good chance there will be capital gain as well. You are not going to get a NVDA type return, but that is not needed if the DGI and cash can cover expenses. You just watch the next egg grow.
Timing the market like that to me is hard. If you are not fully engaged, know what is affecting the business cycles at all moments, in all sectors, investing sentiment and a whole lot of other stuff, I think one could get hurt a bit. Not killer hurt, but certainly it could erode the overall plan of reliable and increasing income. It certainly would depart you from what you are comfortable with and throw you in a discomfort zone. I know it would me. To me, in the beginning, passive investing in good companies was an attraction. I'm not running these companies, others are. I don't have to pay attention to every detail, just passively follow the news, earning and dividends.
Suppose you go all cash, lock it up for 3 years, have a nice ride for those 3 years, then all the CDs are due, rates are <1%, and the market is at an all time high? You'd be investing at prices that would give you less income based on market highs. Add to that, you do all that and 3 months later the market crashes 25%. Gives me the willies just thinking about some bad scenarios.
Good luck to you and update us on your decisions if you could.
One last thing: "We are in a fairly good position." If so, why tinker too much with that, let alone make a massive directional charge?
PS: I love that we can bold and italicize quotes here. I always wondered why SA couldn't accommodate that. It just seems so basic and adds so much context. |
