How much cash do you hold in your investment account?

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corygehr
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How much cash do you hold in your investment account?

Post by corygehr »

Hey folks,

I just finished the Bogleheads' Guide to Investing and I'm excited to join the forum! I'm fortunate enough to be employed somewhere which has a mailing list full of Bogleheads; after following the philosophy and finally reading the source I feel fairly confident about my current financial situation.

One item I'm curious about: how much cash do folks keep in investment accounts, if any?

With some browsing I see various mentions of "I bought more as the market was dropping", etc. and of course, when the market is down there's the refrain "everything is on sale!" But, these seem to go against both philosophies of "don't try to time the market" and "invest early, invest often."

I generally only make purchases when my employee stock plan or bonus stock distributions arrive in my account; I sell those immediately and use the proceeds to purchase according to my target asset allocation; both are quarterly distributions but occur at different parts within. This is a fairly decent amount for a taxable account, I think, at my age and income level considering >30% of my (non-bonus) income goes to various investment sources (retirement accounts, ESPP, HSA, etc.)

I think I'll post a separate question about using those properly as a funding source to keep this one on topic.

Many thanks in advance.
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mhc
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Re: How much cash do you hold in your investment account?

Post by mhc »

You have it right. Invest the money when you get it. Cash is a drag on a portfolio.

I think I have $22 on my settlement fund. I have no idea where it came from and why I haven't done something with it.
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Re: How much cash do you hold in your investment account?

Post by livesoft »

corygehr wrote: Thu Dec 31, 2020 1:03 pmOne item I'm curious about: how much cash do folks keep in investment accounts, if any?
As little as possible. I currently have $1.03 in my Roth IRA and $0.00 in my taxable account because i just reinvested all the distributions paid in the past few days as they appeared in my accounts.

If I post "I bought more shares today because the market had an RBD!" then that means I sold bond fund shares and bought stock fund shares. I don't need any cash laying around to do that sell-then-buy or that exchange. And you don't either.
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Stinky
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Re: How much cash do you hold in your investment account?

Post by Stinky »

Zero.

I have cash supporting my emergency fund plus a small cushion. No cash in investment accounts.
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willthrill81
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Re: How much cash do you hold in your investment account?

Post by willthrill81 »

We only a tiny amount that's not enough to buy a stock ETF in a couple of our investment accounts.

We have a savings account used a bit like a sinking fund for non-monthly and irregular expenses, and it currently has about three months' of our necessary expenses in it. That's more than enough cash for us. I prefer to put the lion's share of our assets to more productive use.
corygehr wrote: Thu Dec 31, 2020 1:03 pm With some browsing I see various mentions of "I bought more as the market was dropping", etc. and of course, when the market is down there's the refrain "everything is on sale!" But, these seem to go against both philosophies of "don't try to time the market" and "invest early, invest often."
You're correct. Many of us specifically recommended back in March, when stocks were down significantly, not to do that.
Last edited by willthrill81 on Thu Dec 31, 2020 2:33 pm, edited 1 time in total.
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Triple digit golfer
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Re: How much cash do you hold in your investment account?

Post by Triple digit golfer »

We have a savings account with a couple months worth of expenses, a checking account with probably a couple hundred dollars, and no other cash in any accounts.
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Re: How much cash do you hold in your investment account?

Post by Jack FFR1846 »

Zero. When dividends come in or I move some cash in to make buys, I do tend to buy ETFs, so there is money left over. If it's in a tax deferred account, I take the rest and buy a mutual fund with it. I actually just did this today where I had $6.13 left over after buying as many shares of VEA as I could. I bought $6.13 of SPTM this morning. In taxable accounts, I just moved in $10 to be able to afford one more share of VTI. Once the $7 or so that's left over settles, I'll move it back to my checking account.
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GerryL
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Re: How much cash do you hold in your investment account?

Post by GerryL »

When I was in accumulation phase, I had everything on auto-reinvest -- both retirement and taxable accounts. Some people might recommend having earnings go into the settlement account and then promptly invested in a way to keep the portfolio in balance, with the focus on the word "promptly."

Now supposedly in the decumulation phase, my retirement accounts are still on auto reinvest, but I keep in cash the amount I will need for my RMD in that year. For me it's a convenience, but many here prefer to do periodic (monthly or quarterly) sales when they take a distribution. In my taxable account, I generally don't leave cash sitting for very long, either moving it to a bank account for living expenses or reinvesting if the bank account is looking bloated.

In other words, what you do with cash will depend on where you are in life. In any event, have a plan for your $$$. If you are committed to passive investing, best -- and easiest -- to keep cash intended for investing invested. If you intend to follow the markets and look for "bargains," well, that's a different story. But still, have a plan for the $$$.
Lambeau
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Re: How much cash do you hold in your investment account?

Post by Lambeau »

40% of my portfolio is in Treasury MM.
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Re: How much cash do you hold in your investment account?

Post by Broken Man 1999 »

I try not to have much in our settlement accounts, the only place cash accumulates.

At the moment I have some recent dividends in settlement funds, but I am waiting for everything to finish up this year as I am planning to do some rebalancing in the new year. No use doing more transactions than necessary. I don't want any open orders or accounts waiting for a trade to settle. By the end of next week my cash holdings across my accounts will be very, very little, just like it is most of the time.

DW's accounts show $.03 in her Roth settlement fund, and $.04 in her TIRA settlement fund. My accounts are a tad more complicated than hers.

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Re: How much cash do you hold in your investment account?

Post by Broken Man 1999 »

willthrill81 wrote: Thu Dec 31, 2020 2:30 pm We only a tiny amount that's not enough to buy a stock ETF in a couple of our investment accounts.

We have a savings account used a bit like a sinking fund for non-monthly and irregular expenses, and it currently has about three months' of our necessary expenses in it. That's more than enough cash for us. I prefer to put the lion's share of our assets to more productive use.
corygehr wrote: Thu Dec 31, 2020 1:03 pm With some browsing I see various mentions of "I bought more as the market was dropping", etc. and of course, when the market is down there's the refrain "everything is on sale!" But, these seem to go against both philosophies of "don't try to time the market" and "invest early, invest often."
You're correct. Many of us specifically recommended back in March, when stocks were down significantly, not to do that.
You can always use market swoons to rebalance. The decline early this year certainly provided an opportunity to sell bonds and buy stocks. And, I did. And, I am happy I did so.

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hoffse
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Re: How much cash do you hold in your investment account?

Post by hoffse »

I have a pretty sizable sinking fund for annual expenses/dues and other lumpy expenses. I have to pay all my own taxes so that account has either a lot or very little cash in it at any given time. When we are saving for home remodels or vacations that’s also an opportunity to accrue significant cash.

In March I had some cash sitting in my bank account that was supposed to be used for a vacation to NYC. We were actually supposed to fly out the day everything shut down. Obviously that trip never happened, so I had a couple grand that I threw into the market at the very bottom. Plans change and I invest the cash I have when that happens.

I also use credit cards to give me float as a cash flow management tool. I’ve been able to buy some dips by using that credit card float and then paying myself back with future cash flow. I seem to do this 3 or 4 times a year. I have also made sure my highest limit/highest cash back card closes on the 14th of the month. It means that I can pay taxes on the 15th and have almost 60 days of float if I want it.

I don’t just have a huge pot of cash or bonds sitting around doing nothing except waiting to time the market. There is always some intended use for my cash, usually within 12 months of my adding it to the account. But the nature of having such lumpy expenses means I can occasionally “buy the dip” without keeping dry powder around solely for that purpose.
Marseille07
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Re: How much cash do you hold in your investment account?

Post by Marseille07 »

As little as possible. Not a huge fan of 'holding' cash in an investment account. I park cash in checking / savings, if I need to do so at all.
ImUrHuckleberry
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Re: How much cash do you hold in your investment account?

Post by ImUrHuckleberry »

We have 2 years expenses in MM right now but only because we are moving our EF to I-Bonds and we are in the period where we cannot access the funds. Once those funds are accessible (only in the event of a real emergency) the cash (MM) in our taxable brokerage will be invested at our AA.
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Re: How much cash do you hold in your investment account?

Post by TierArtz »

I'm a late-stage accumulator and throttle the balance between a taxable money market account and a checking account to keep the cash portion of all liquid assets at 1.5% [checking (varies) and savings ($2K) net of credit card balance; ESPP cash to be redirected toward an index ASAP; medical flex; mortgage escrow; and the MM itself].

The simple version is keep enough cash to fund two IRAs in January, rebuild until the MM total is about $24K with $10K serving as an emergency fund of sorts. Any extra cash left after maxing retirement investments and hitting $24K in MM, and just enough cash in checking to pay the credit card off each month, goes to bond or stock mutual funds.

After I retire in 2024 or so, I'll probably kick the cash% up a percent or two.
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Doom&Gloom
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Re: How much cash do you hold in your investment account?

Post by Doom&Gloom »

I've had $0.04 in mine for nearly a year now. I'm waiting for the right opportunity and the right moment to put it to work.

j/k. It's in my settlement account and quite annoying.
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Re: How much cash do you hold in your investment account?

Post by bogledogle »

I keep a lot of cash in my investment account and just see it as part of my emergency fund. As I accumulate more cash in my checking/savings account, I invest some of the cash from my investment account and move some new cash in. In theory this allows me to "buy as the market drops", but mostly it is a convenience factor for me to not have to wait for cash to settle before I buy something, or do a backdoor roth.
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Re: How much cash do you hold in your investment account?

Post by willthrill81 »

Broken Man 1999 wrote: Thu Dec 31, 2020 2:50 pm
willthrill81 wrote: Thu Dec 31, 2020 2:30 pm We only a tiny amount that's not enough to buy a stock ETF in a couple of our investment accounts.

We have a savings account used a bit like a sinking fund for non-monthly and irregular expenses, and it currently has about three months' of our necessary expenses in it. That's more than enough cash for us. I prefer to put the lion's share of our assets to more productive use.
corygehr wrote: Thu Dec 31, 2020 1:03 pm With some browsing I see various mentions of "I bought more as the market was dropping", etc. and of course, when the market is down there's the refrain "everything is on sale!" But, these seem to go against both philosophies of "don't try to time the market" and "invest early, invest often."
You're correct. Many of us specifically recommended back in March, when stocks were down significantly, not to do that.
You can always use market swoons to rebalance. The decline early this year certainly provided an opportunity to sell bonds and buy stocks. And, I did. And, I am happy I did so.

Broken Man 1999
Yes, but that's not what I was referring to, nor do I think that's what corygehr was referring to either. Many were 'over-rebalancing' into stocks, moving their emergency fund into stocks, etc., which are market timing actions.
Last edited by willthrill81 on Thu Dec 31, 2020 3:23 pm, edited 1 time in total.
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Re: How much cash do you hold in your investment account?

Post by InvestorHowie »

Outside of my emergency fund which is in a HYSA I only have about $10 in one taxable account where I only have ETFs. Should probably just add enough to buy another share or add a tax-efficient fund to make sure every dollar is working.
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Re: How much cash do you hold in your investment account?

Post by Carol88888 »

None. But I keep 3 months of living expenses in a checking account which I replenish with dividends as they come in.

Cash is not an investment. Not at these rates any way.
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Re: How much cash do you hold in your investment account?

Post by pasadena »

The only cash I hold there is my emergency fund, so $25k, plus $6k in preparation for my backdoor Roth on Monday. None of this money is counted as part of my AA.
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corygehr
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Re: How much cash do you hold in your investment account?

Post by corygehr »

Thanks for the helpful responses, everyone!
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Re: How much cash do you hold in your investment account?

Post by grabiner »

I like to buy ETFs in round lots of 100 shares. Therefore, in my taxable account, if my next purchase will be an ETF, then I accumulate cash, either in my bank account or my money-market fund, until I have enough to buy 100 shares of the ETF.

If my next purchase will be a mutual fund, I usually wait to have a few thousand dollars to invest.

In my Roth IRA, I invest every possible dollar, buying an odd lot of an ETF if necessary.

The difference is that cash in my Roth IRA will sit there for the entire year, as I reinvest all dividends and only add money in January. In contrast, if I leave cash in my taxable account, it will likely get invested within a few months, as I accumulate more unspent salary and take dividends in cash.
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Re: How much cash do you hold in your investment account?

Post by Notsobad »

I keep about 40% of my emergency funds there, the rest at the bank
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Re: How much cash do you hold in your investment account?

Post by abuss368 »

I don’t have a specifics allocation to cash. I don’t even have a separate emergency fund account anymore.

I simply have one cash account. That is it. We build it each pay period. No limits. No rules. Just plain old cash.

There when we need it.

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Re: How much cash do you hold in your investment account?

Post by goodenyou »

25%. A lot. I sold commercial property and have not put it into bonds. I am also saving for a house that I want to buy for cash.
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Re: How much cash do you hold in your investment account?

Post by bck63 »

I keep all my cash in an investment account, which is about 3% of my portfolio. Looking to increase that to probably 5-10%, as I am five years from retirement.

I use Fidelity CMA, so transferring from the core money market fund in my Fidelity brokerage account to the CMA for expenses is the same as transferring cash. Immediate transfer, no settlement time.
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Re: How much cash do you hold in your investment account?

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abuss368 wrote: Thu Dec 31, 2020 10:12 pm I don’t have a specifics allocation to cash. I don’t even have a separate emergency fund account anymore.

I simply have one cash account. That is it. We build it each pay period. No limits. No rules. Just plain old cash.

There when we need it.

Tony
This is such a sensible approach. Thanks to you boglehead folks I have learned that I really don't need an emergency fun, given my taxable account investments. I do keep about 3% cash and will likely increase. But I have plenty of liquidity in stock and bond funds.
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Re: How much cash do you hold in your investment account?

Post by Rainier »

abuss368 wrote: Thu Dec 31, 2020 10:12 pm I don’t have a specifics allocation to cash. I don’t even have a separate emergency fund account anymore.

I simply have one cash account. That is it. We build it each pay period. No limits. No rules. Just plain old cash.

There when we need it.

Tony
This is your checking account or something else?
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goingup
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Re: How much cash do you hold in your investment account?

Post by goingup »

We've long held 5-10% cash in the portfolio. I consider it part of the fixed income side of a 60/40 asset allocation. Not really concerned that there's cash drag or that's its not optimal.
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Re: How much cash do you hold in your investment account?

Post by Nickel & Dime »

abuss368 wrote: Thu Dec 31, 2020 10:12 pm I don’t have a specifics allocation to cash. I don’t even have a separate emergency fund account anymore.

I simply have one cash account. That is it. We build it each pay period. No limits. No rules. Just plain old cash.

There when we need it.

Tony
I do something similar. I only hold “cash” in my checking account, with no emergency fund. Not being a huge “bucketing” fan, I still use the approach for this account. Basically, any money that goes over the threshold (in my current case, $4k, which covers the bills and rent with a little extra buffer), will get transferred to my taxable account to get invested. When it falls below the 4k, it gets built back up from the paychecks. Rinse and repeat. That is the only substantial cash that I hold.
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Re: How much cash do you hold in your investment account?

Post by howard71 »

I keep 20% cash in all of my accounts. By that I mean T-Bills or a short term government bond fund.

That is what the Golden Butterfly portfolio calls for. With the Permanent Portfolio which the GB is based on, it's 25%.
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Re: How much cash do you hold in your investment account?

Post by Bama12 »

6,000 cash in Roth, just put it in this morning.

I will buy on Monday.
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Re: How much cash do you hold in your investment account?

Post by abuss368 »

bck63 wrote: Fri Jan 01, 2021 11:30 am
abuss368 wrote: Thu Dec 31, 2020 10:12 pm I don’t have a specifics allocation to cash. I don’t even have a separate emergency fund account anymore.

I simply have one cash account. That is it. We build it each pay period. No limits. No rules. Just plain old cash.

There when we need it.

Tony
This is such a sensible approach. Thanks to you boglehead folks I have learned that I really don't need an emergency fun, given my taxable account investments. I do keep about 3% cash and will likely increase. But I have plenty of liquidity in stock and bond funds.
Simple works!
Tony
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Re: How much cash do you hold in your investment account?

Post by abuss368 »

Rainier wrote: Fri Jan 01, 2021 12:14 pm
abuss368 wrote: Thu Dec 31, 2020 10:12 pm I don’t have a specifics allocation to cash. I don’t even have a separate emergency fund account anymore.

I simply have one cash account. That is it. We build it each pay period. No limits. No rules. Just plain old cash.

There when we need it.

Tony
This is your checking account or something else?
One checking account and one money market at Vanguard.
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Re: How much cash do you hold in your investment account?

Post by abuss368 »

Nickel & Dime wrote: Fri Jan 01, 2021 1:40 pm
abuss368 wrote: Thu Dec 31, 2020 10:12 pm I don’t have a specifics allocation to cash. I don’t even have a separate emergency fund account anymore.

I simply have one cash account. That is it. We build it each pay period. No limits. No rules. Just plain old cash.

There when we need it.

Tony
I do something similar. I only hold “cash” in my checking account, with no emergency fund. Not being a huge “bucketing” fan, I still use the approach for this account. Basically, any money that goes over the threshold (in my current case, $4k, which covers the bills and rent with a little extra buffer), will get transferred to my taxable account to get invested. When it falls below the 4k, it gets built back up from the paychecks. Rinse and repeat. That is the only substantial cash that I hold.
Very sensible approach.
Tony
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Re: How much cash do you hold in your investment account?

Post by anon_investor »

I have $0.05 in my Roth IRA settlement account leftover from my last ETF purchase...
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Re: How much cash do you hold in your investment account?

Post by Ferdinand2014 »

abuss368 wrote: Fri Jan 01, 2021 2:08 pm
Rainier wrote: Fri Jan 01, 2021 12:14 pm
abuss368 wrote: Thu Dec 31, 2020 10:12 pm I don’t have a specifics allocation to cash. I don’t even have a separate emergency fund account anymore.

I simply have one cash account. That is it. We build it each pay period. No limits. No rules. Just plain old cash.

There when we need it.

Tony
This is your checking account or something else?
One checking account and one money market at Vanguard.
Tony
Do you still keep a bond fund? Do you have an allocation to stocks/bonds/cash or are you stocks/cash now?
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Re: How much cash do you hold in your investment account?

Post by mikejuss »

In my opinion (and probably that of most Bogleheads), there's really no point in holding cash in an investment account. If you're unsure whether you want to invest some cash, keep it in a checking or savings account until you can bear to part with it; that's also the place where you should keep your emergency fund and any cash you plan on using for a large purchase (e.g., a house downpayment). I might be a bit strict in my approach, but I treat any money I put into my investment accounts (brokerage, IRA, 401[K]) as retirement funds I will not touch for decades.
Last edited by mikejuss on Sat Jan 02, 2021 10:57 am, edited 2 times in total.
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Re: How much cash do you hold in your investment account?

Post by nisiprius »

I'm conservative, bond-heavy, hold a good amount of cash that I considered to be "investment," not "emergency fund"--and keep as little in brokerage money market mutual funds as I can conveniently manage.

I just checked, and as I write this, the number is literally $0.00. $0.00 in the settlement account and no other money market mutual funds.

The reason is simply that for some time now, FDIC-insured bank accounts have paid more than money market mutual funds, with less risk. There's simply no reason I can think of to hold "cash" at a brokerage except to facilitate trades.* Frankly, the need to plan a week ahead and transfer money into the brokerage to make a trade is helpful to my self-discipline.

I wouldn't overemphasize it but the collapse of the Reserve Primary money market fund** in 2008 proved the truth of all the statements like "money market mutual funds are considered to be quite safe, but technically are not as safe as FDIC-insured bank accounts." What was deeply shocking was that this was not any old money market fund, it was one of the biggest, oldest, and most respected, and was literally run by the man who invented money market mutual funds. Perhaps bank examiners are good for something after all.

Some of those bank accounts are retirement accounts (i.e. traditional IRAs and Roth IRAs). I don't draw any fixed boundary but I do not consider all of my bank accounts to be emergency funds, some of it is "investments."

(A note on terminology. "Savings" are whatever you don't spend, "investments" are whatever you choose to do with your savings. There is a specialized kind of corporation called an "investment company," subject to special regulations and tax rules, whose business is making investments rather than making things. Investment companies are more commonly known as "mutual funds and ETFs" and usually hold securities. For this reason, the word "investment" has come to mean "investment in stocks and bonds," but it is, in fact, wherever you put the money you don't spend.)

Until about the year 2000, traditional investment advice always called for the use of all three asset classes (stocks aka equities, bonds aka fixed income, cash aka short-term reserves), three slices in the pie chart printed on your account statement. The Vanguard LifeStrategy funds long included short-term reserves within the fund's holdings, i.e. integral to the portfolio and accessible as an "emergency fund."

*Unless you need a place to put seven-figure amounts of cash and can't conveniently get it all FDIC-insured.

**(Shareholders eventually got back over something like $0.99 on the dollar, but it took over two years and they got nothing for months. They got irregular chunks in fits and starts as each of multiple court cases was resolved).
Last edited by nisiprius on Sat Jan 02, 2021 2:35 pm, edited 1 time in total.
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Re: How much cash do you hold in your investment account?

Post by rob »

In tax deferred - always zero. It's a pure drag you don't need.

In taxable I put up with some drag for convenience. At this time of year it's higher due to dividend payouts.
- I auto invest into a money market fund and ad-hoc invest into the relevant holdings to mesh with the portfolio. Every taxable invest usually needs some matching jiggle in a tax deferred account, so I do those a few times each year. Only the most tax efficient parts of the portfolio are in taxable.
- I do not reinvest dividends but push all dividends to the same money market as makes it easier to keep in bands.
- Part of this is legacy thinking from noncovered tax lots but that's irrelevant now days.
| Rob | Its a dangerous business going out your front door. - J.R.R.Tolkien
novemberrain
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Re: How much cash do you hold in your investment account?

Post by novemberrain »

$100, from among a 7 figure stock portfolio
Doctor Rhythm
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Re: How much cash do you hold in your investment account?

Post by Doctor Rhythm »

Just checked: $15.96 in an IRA. Thankfully it’s not in a taxable account generating fully taxable interest.
corygehr wrote: Thu Dec 31, 2020 1:03 pm With some browsing I see various mentions of "I bought more as the market was dropping", etc. and of course, when the market is down there's the refrain "everything is on sale!" But, these seem to go against both philosophies of "don't try to time the market" and "invest early, invest often."
I think you’re astutely pointing out that our behavior isn’t always entirely congruous with our philosophy. On the other hand, if you rebalance from bonds to stocks during a bear market, then you are basically buying during a sale without market-timing. Similarly, if you invest early and often (eg, as you are doing with your ESPP or as others do with their monthly automated investment into retirement or taxable accounts), you take advantage of sale-priced stocks. Neither of these steps require cash in your investment accounts.
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abuss368
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Re: How much cash do you hold in your investment account?

Post by abuss368 »

Ferdinand2014 wrote: Sat Jan 02, 2021 10:28 am
abuss368 wrote: Fri Jan 01, 2021 2:08 pm
Rainier wrote: Fri Jan 01, 2021 12:14 pm
abuss368 wrote: Thu Dec 31, 2020 10:12 pm I don’t have a specifics allocation to cash. I don’t even have a separate emergency fund account anymore.

I simply have one cash account. That is it. We build it each pay period. No limits. No rules. Just plain old cash.

There when we need it.

Tony
This is your checking account or something else?
One checking account and one money market at Vanguard.
Tony
Do you still keep a bond fund? Do you have an allocation to stocks/bonds/cash or are you stocks/cash now?
Still stocks and bonds - Total Bond.
John C. Bogle: “Simplicity is the master key to financial success."
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9-5 Suited
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Re: How much cash do you hold in your investment account?

Post by 9-5 Suited »

grabiner wrote: Thu Dec 31, 2020 9:07 pm I like to buy ETFs in round lots of 100 shares. Therefore, in my taxable account, if my next purchase will be an ETF, then I accumulate cash, either in my bank account or my money-market fund, until I have enough to buy 100 shares of the ETF.

If my next purchase will be a mutual fund, I usually wait to have a few thousand dollars to invest.

In my Roth IRA, I invest every possible dollar, buying an odd lot of an ETF if necessary.

The difference is that cash in my Roth IRA will sit there for the entire year, as I reinvest all dividends and only add money in January. In contrast, if I leave cash in my taxable account, it will likely get invested within a few months, as I accumulate more unspent salary and take dividends in cash.
Why do you find the advantage of round 100 share lots outweighs the opportunity cost of holding cash for longer periods? Haven’t heard of this before but your reasoning is always sound and interesting!
bck63
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Re: How much cash do you hold in your investment account?

Post by bck63 »

9-5 Suited wrote: Sat Jan 02, 2021 3:19 pm
grabiner wrote: Thu Dec 31, 2020 9:07 pm I like to buy ETFs in round lots of 100 shares. Therefore, in my taxable account, if my next purchase will be an ETF, then I accumulate cash, either in my bank account or my money-market fund, until I have enough to buy 100 shares of the ETF.

If my next purchase will be a mutual fund, I usually wait to have a few thousand dollars to invest.

In my Roth IRA, I invest every possible dollar, buying an odd lot of an ETF if necessary.

The difference is that cash in my Roth IRA will sit there for the entire year, as I reinvest all dividends and only add money in January. In contrast, if I leave cash in my taxable account, it will likely get invested within a few months, as I accumulate more unspent salary and take dividends in cash.
Why do you find the advantage of round 100 share lots outweighs the opportunity cost of holding cash for longer periods? Haven’t heard of this before but your reasoning is always sound and interesting!
I am just compelled to agree that grabiner's information and reasoning is always sound and interesting and has been helpful many, many times.
bck63
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Re: How much cash do you hold in your investment account?

Post by bck63 »

nisiprius wrote: Sat Jan 02, 2021 10:47 am There is a specialized kind of corporation called an "investment company," subject to special regulations and tax rules, whose business is making investments rather than making things.
My very first investment, many years ago, was in American Funds' "The Investment Company of America."

I always liked that phrase.

As I recall it had something like a 5.75% sales commission, plus a pretty high expense ratio. Despite that, I was quite happy in American Funds for a long time, until I heard a talk by Mr. Bogle and got religion.
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Doc
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Re: How much cash do you hold in your investment account?

Post by Doc »

9-5 Suited wrote: Sat Jan 02, 2021 3:19 pm
grabiner wrote: Thu Dec 31, 2020 9:07 pm I like to buy ETFs in round lots of 100 shares. Therefore, in my taxable account, if my next purchase will be an ETF, then I accumulate cash, either in my bank account or my money-market fund, until I have enough to buy 100 shares of the ETF.

If my next purchase will be a mutual fund, I usually wait to have a few thousand dollars to invest.

In my Roth IRA, I invest every possible dollar, buying an odd lot of an ETF if necessary.

The difference is that cash in my Roth IRA will sit there for the entire year, as I reinvest all dividends and only add money in January. In contrast, if I leave cash in my taxable account, it will likely get invested within a few months, as I accumulate more unspent salary and take dividends in cash.
Why do you find the advantage of round 100 share lots outweighs the opportunity cost of holding cash for longer periods? Haven’t heard of this before but your reasoning is always sound and interesting!
Once upon a time round lots had some cost advantage. With the current trend to be able buy/sell even fractional shares with essentially zero fee I have abandoned my long standing round lot policy.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.
Pegasus_RPG
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Re: How much cash do you hold in your investment account?

Post by Pegasus_RPG »

None in my brokerage accounts (everything there is always immediately fully invested with distributions reinvested, or at least tied up in pending conditional orders for my "play money" individual stock trades) but I do have various bank and credit union accounts I consider investments as they pay 3% APY or more, well-beating current bond yields. (Most have some balance limit for their promotional rates which is why I have multiple such accounts at various places in each of mine and my wife's names to double up on the promo rate amounts.) Given that these accounts are FDIC/NCUA insured, I also count them as part of my emergency funds (which for me is six months of living expenses.)

Each account is just another column on my spreadsheet, so it's hardly any more effort to track them. (The rows are expenses/transactions.)

Since these accounts function as both investments and EF simultaneously, I don't have to agonize over losing money to inflation on emergency funds versus planning to withdraw from Roth IRA contributions in an emergency in lieu of a cash EF. Plus since they're at various different institutions, I get geographic and entity diversification too. :happy
UpperNwGuy
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Re: How much cash do you hold in your investment account?

Post by UpperNwGuy »

corygehr wrote: Thu Dec 31, 2020 1:03 pm One item I'm curious about: how much cash do folks keep in investment accounts, if any?
In my Vanguard settlement fund: $1
In my Fidelity settlement fund: $1
In my Schwab settlement fund: 0

I use new money each month to buy mutual funds. It momentarily passes through the settlement fund, but never just sits there.

If I want to rebalance into stock mutual funds because a declining stock market has caused my asset allocation to get out of whack, I sell an equal amount of bond mutual funds.
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