Separate cash pocket?

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Topic Author
nrkv
Posts: 247
Joined: Thu Jan 21, 2021 1:34 pm

Separate cash pocket?

Post by nrkv »

Hello,
I usually have emergency fund for 6-7 months of expenses, about 2 to 3 thousand in checking account and the rest is moved to investments to invest within few days of cash transfer.

A friend mentioned that he doesn’t invest everything but keeps couple thousands ready in brokerage account. For example, this Monday when VTI is down to $218, I didn’t have any cash to purchase or able to sell anything to capture losses and reuse funds for purchase. I understand it comes under timing the market or it doesn’t matter in 10 years but it sure gives satisfaction.

Just wondering if there’s a behavior that I can adapt. Thank you!
Last edited by nrkv on Sat Jul 24, 2021 11:35 am, edited 1 time in total.
BogleFan510
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Re: Secret cash pocket?

Post by BogleFan510 »

The bevavior that maximizes your returns is 'stick with the plan and ignore short term noise. You are welcome.
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gwe67
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Re: Secret cash pocket?

Post by gwe67 »

nrkv wrote: Sat Jul 24, 2021 11:13 am Hello,
I usually have emergency fund for 6-7 months of expenses, about 2 to 3 thousand in checking account and the rest is moved to investments to invest within few days of cash transfer.

A friend mentioned that he doesn’t invest everything but keeps couple thousands ready in brokerage account. For example, this Monday when VTI is down to $218, I didn’t have any cash to purchase or able to sell anything to capture losses and reuse funds for purchase. I understand it comes under timing the market or it doesn’t matter in 10 years but it sure gives satisfaction.

Just wondering if there’s a behavior that I can adapt. Thank you!
Keeping your money on the sidelines waiting to jump in when there is a downturn is market timing (as you acknowledge) and doesn't work. While you are waiting for the downturn you have missed out on gains.

If you are buying and holding VTI long-term then you should have no losses to "capture".

If you are stock-picking that is another mistake.
Last edited by gwe67 on Sat Jul 24, 2021 11:19 am, edited 1 time in total.
VTI 48%, VXUS 12%, BND 40%
Silk McCue
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Re: Secret cash pocket?

Post by Silk McCue »

I'd get your satisfaction somewhere else. We get ours by having a solid plan and sticking to it. That's how you run a marathon.

Cheers
sailaway
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Re: Secret cash pocket?

Post by sailaway »

Silk McCue wrote: Sat Jul 24, 2021 11:19 am I'd get your satisfaction somewhere else. We get ours by having a solid plan and sticking to it. That's how you run a marathon.

Cheers
I love not having to make daily decisions about my money! Gives me more time to debate the best way to determine your savings rate and goals :wink:
jebmke
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Re: Secret cash pocket?

Post by jebmke »

I thought this was going to be a thread on pants.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
livesoft
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Re: Secret cash pocket?

Post by livesoft »

Presumably, you have an asset allocation for your portfolio that includes some fixed income in the form of a bond mutual fund or bond ETFs shares. So when you feel that you need to buy more VTI, you just sell some fixed income and buy some VTI in an act of market timing rebalancing. Maybe you do this in your IRA or 401(k) so that there are no tax consequences.
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Kenkat
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Re: Secret cash pocket?

Post by Kenkat »

jebmke wrote: Sat Jul 24, 2021 11:30 am I thought this was going to be a thread on pants.
Yes I was going to chime in on where I keep my emergency $20...
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anon_investor
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Re: Secret cash pocket?

Post by anon_investor »

jebmke wrote: Sat Jul 24, 2021 11:30 am I thought this was going to be a thread on pants.
There was a thread that mentioned socks with a pocket for cash...
coachd50
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Re: Separate cash pocket?

Post by coachd50 »

nrkv wrote: Sat Jul 24, 2021 11:13 am Hello,
I usually have emergency fund for 6-7 months of expenses, about 2 to 3 thousand in checking account and the rest is moved to investments to invest within few days of cash transfer.

A friend mentioned that he doesn’t invest everything but keeps couple thousands ready in brokerage account. For example, this Monday when VTI is down to $218, I didn’t have any cash to purchase or able to sell anything to capture losses and reuse funds for purchase. I understand it comes under timing the market or it doesn’t matter in 10 years but it sure gives satisfaction.

Just wondering if there’s a behavior that I can adapt. Thank you!
Not only does it not matter in 10 years- it really doesn’t matter today! Lets say you are keeping $2,000 in the “secret cash pocket”. Market drops 2% in a day. You buy. On cue market bounces back immediately- YAY!!!! You made 2% on $2,000 ($40) which might get you a dinner for 2 at Outback if you get dessert and tip.

Plus now you need to replenish the secret pocket of cash from some source
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riverant
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Re: Separate cash pocket?

Post by riverant »

The goal is that your portfolio is large enough that any small amount of “dry powder” is negligible even after buying on a dip. Also, think how many record highs you’ll miss with your cash waiting for the next dip. Will the next dip still be at a higher price than today? If you get jollies from this, just hold some bonds in a tax sheltered account and rebalance on dips.
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ApeAttack
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Re: Secret cash pocket?

Post by ApeAttack »

jebmke wrote: Sat Jul 24, 2021 11:30 am I thought this was going to be a thread on pants.
It's not too late to change the direction of the thread.
May all your index funds gain +0.5% today.
Topic Author
nrkv
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Re: Separate cash pocket?

Post by nrkv »

Thank you for the responses. I will stick with investing when I have cash and not necessarily wait for small dips.
I mistyped secret instead of separate. Enjoyed the funny responses though :happy
an_asker
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Re: Secret cash pocket?

Post by an_asker »

jebmke wrote: Sat Jul 24, 2021 11:30 am I thought this was going to be a thread on pants.
When the market goes up like a rocket, I find myself panting!

You're welcome ;-)
wishy-washy
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Re: Secret cash pocket?

Post by wishy-washy »

anon_investor wrote: Sat Jul 24, 2021 11:44 am
jebmke wrote: Sat Jul 24, 2021 11:30 am I thought this was going to be a thread on pants.
There was a thread that mentioned socks with a pocket for cash...
I have two pairs of those socks! For when I travel to some international destinations.
MrJedi
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Re: Separate cash pocket?

Post by MrJedi »

My brokers (Fidelity and Vanguard) let me initiate a transfer and buy stocks/ETFs immediately before the transactions fully clear and post. There is no need to keep it as cash in the brokerage unless that is your preferred way to hold cash.
Jags4186
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Re: Separate cash pocket?

Post by Jags4186 »

Don’t listen to your friends for investment advice. Especially silly advice like this. If you learn to ignore this stuff, you won’t be sucked into the “hot tip” which is almost certainly going to be a loser.
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anon_investor
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Re: Secret cash pocket?

Post by anon_investor »

wishy-washy wrote: Sat Jul 24, 2021 2:40 pm
anon_investor wrote: Sat Jul 24, 2021 11:44 am
jebmke wrote: Sat Jul 24, 2021 11:30 am I thought this was going to be a thread on pants.
There was a thread that mentioned socks with a pocket for cash...
I have two pairs of those socks! For when I travel to some international destinations.
They look silly with shorts :P ... I like traveling to warm places...
Topic Author
nrkv
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Joined: Thu Jan 21, 2021 1:34 pm

Re: Separate cash pocket?

Post by nrkv »

MrJedi wrote: Sat Jul 24, 2021 2:48 pm My brokers (Fidelity and Vanguard) let me initiate a transfer and buy stocks/ETFs immediately before the transactions fully clear and post. There is no need to keep it as cash in the brokerage unless that is your preferred way to hold cash.
Interesting. I don’t think Schwab allows this; at least didn’t see the option.
coachd50
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Re: Separate cash pocket?

Post by coachd50 »

nrkv wrote: Sat Jul 24, 2021 4:09 pm
MrJedi wrote: Sat Jul 24, 2021 2:48 pm My brokers (Fidelity and Vanguard) let me initiate a transfer and buy stocks/ETFs immediately before the transactions fully clear and post. There is no need to keep it as cash in the brokerage unless that is your preferred way to hold cash.
Interesting. I don’t think Schwab allows this; at least didn’t see the option.
But regardless of the option or not, the principle is still the same. In order to do this one needs to have a few thousand sitting SOMEWHERE. Whether that is in a credit union, an online savings account, a brokerage account etc. In order to buy a daily dip, you need to have that cash sitting on the sideline.

I thought THAT was the premise of the discussion. To be "fully invested" (excluding emergency fund and cash for monthly expenses etc. ) or to have a couple of thousand sitting on the side waiting for a dip. And as I pointed out above, if we are talking about $2,000, then a daily 2% bounce yields $40 bucks if you time it right.
Topic Author
nrkv
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Re: Separate cash pocket?

Post by nrkv »

coachd50 wrote: Sat Jul 24, 2021 5:55 pm
nrkv wrote: Sat Jul 24, 2021 4:09 pm
MrJedi wrote: Sat Jul 24, 2021 2:48 pm My brokers (Fidelity and Vanguard) let me initiate a transfer and buy stocks/ETFs immediately before the transactions fully clear and post. There is no need to keep it as cash in the brokerage unless that is your preferred way to hold cash.
Interesting. I don’t think Schwab allows this; at least didn’t see the option.
But regardless of the option or not, the principle is still the same. In order to do this one needs to have a few thousand sitting SOMEWHERE. Whether that is in a credit union, an online savings account, a brokerage account etc. In order to buy a daily dip, you need to have that cash sitting on the sideline.

I thought THAT was the premise of the discussion. To be "fully invested" (excluding emergency fund and cash for monthly expenses etc. ) or to have a couple of thousand sitting on the side waiting for a dip. And as I pointed out above, if we are talking about $2,000, then a daily 2% bounce yields $40 bucks if you time it right.
The idea of keeping money on the side has sailed. My comment about Schwab is not to time the market. In general when I do money transfer, it usually takes a day or two for the funds to be available in Schwab to trade.
coachd50
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Re: Separate cash pocket?

Post by coachd50 »

nrkv wrote: Sat Jul 24, 2021 6:27 pm
coachd50 wrote: Sat Jul 24, 2021 5:55 pm
nrkv wrote: Sat Jul 24, 2021 4:09 pm
MrJedi wrote: Sat Jul 24, 2021 2:48 pm My brokers (Fidelity and Vanguard) let me initiate a transfer and buy stocks/ETFs immediately before the transactions fully clear and post. There is no need to keep it as cash in the brokerage unless that is your preferred way to hold cash.
Interesting. I don’t think Schwab allows this; at least didn’t see the option.
But regardless of the option or not, the principle is still the same. In order to do this one needs to have a few thousand sitting SOMEWHERE. Whether that is in a credit union, an online savings account, a brokerage account etc. In order to buy a daily dip, you need to have that cash sitting on the sideline.

I thought THAT was the premise of the discussion. To be "fully invested" (excluding emergency fund and cash for monthly expenses etc. ) or to have a couple of thousand sitting on the side waiting for a dip. And as I pointed out above, if we are talking about $2,000, then a daily 2% bounce yields $40 bucks if you time it right.
The idea of keeping money on the side has sailed. My comment about Schwab is not to time the market. In general when I do money transfer, it usually takes a day or two for the funds to be available in Schwab to trade.
Gotcha. I thought it was alluding to another potential way to buy dips. Thank you for the clarification
etfan
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Re: Separate cash pocket?

Post by etfan »

Smarter people have done the math on this and concluded that the "dry powder" method (which is what this is) does not work on average.
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