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Strategies & Market Trends : Dividend Growth Investing and chit chat.
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To: LegitDGIguy who wrote (1430)12/6/2021 4:12:57 AM
From: Chairo Kiisu Ichiro4 Recommendations

Recommended By
cemanuel
DaveVK
luvdividends
suncoaster

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RE: How important is having extra cash?

=> It depends.

I want (and have) extra cash outside my portfolios -as a contingency reserve- that I never invest. In my experience having sufficient immediately available cash stops many (most?) problems before they can grow into crises.

However, I don't accumulate unspent cash in any of my portfolios.

In part 'cause:
  • I have and use a purchase plan[1] for each portfolio so I rarely have more than $5 unspent[2].
  • In an inflationary environment (which we are experiencing), cash is (in my opinion) a wasting asset[3], so I don't hold it in any portfolio any longer than absolutely necessary.

Best wishes,

Kiisu
1. I decide (often months in advance) what companies to buy. As dividends come in, I know how that cash will be spent. When I trim (or sell) I use a custom spreadsheet to determine what and how much to buy. I use the spreadsheet to run cost/income scenarios (which helps me increase potential annual income or at worst, minimize the hit to potential annual income).

2. When I run my accounts at the end of the month (or end of quarter) at times I'll show a balance of a few hundred dollars ... dividends that arrived after the close of the last trading day of the period (it's how Schwab does business). However, that cash is normally spent sometime during the first day of the following period.

3. A wasting asset is an asset that irreversibly declines in value over time.
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