How much cash should you hold in your investment portfolio?
HTML-код
- Опубликовано: 20 июн 2024
- How much cash should you hold in your investment portfolio? Here are 3 reasons you should think twice before holding more cash.
📈 FOR MORE ON VALUATION, SIGN UP FOR MY COURSE
- Value stocks like Warren Buffett (including how to calculate his "owner's earnings")
- Calculate Peter Lynch's PE/G ratio
- Benjamin Graham's famous formula for valuing growth stocks
- John Burr Williams' dividend discount model
- Why P/E ratios are flawed (and what to use instead)
- Downloadable Excel templates
- Step-by-step walkthroughs
- PDF worksheets
- Infinite access to future content (and ask-me-anything-about-valuation!)
- UNLIMITED return policy! If you don't like the course, I'll give you your money back... anytime (I want you to love the course and learn a lot!)
The course is $50 per hour of content and will increase over time as I add new material. (Currently $199 retail.) You can get 50% off by using coupon code RUclips2022. nathanwinklepleck.xperiencify...
⁉️ MONTHLY Q&A
- Monthly Q&A for Patreon and RUclips members (ask me anything!)
- Ad-free videos
- Help support the free content on RUclips!
If you want to sign up for Patreon, you can do it here: / nathanwinklepleck
Or if you want to join on RUclips, you can do it here: / nathanwinklepleckcfa
✉️ CONTACT ME
If you want to get in touch with me, my email is: nathan@dividendgrowthmachine.com
😀 Thank you all supporters!
📚 AMAZON #1 BEST SELLER
- I wrote a book on dividend investing. 700+ reviews later, it's been quite the hit!
- Read it here: amzn.to/3gVJBZY.
- Audiobook version (read by me): adbl.co/3h3IaLA
💾 FINANCIAL DATA 💾
- My favorite resource for financial data is QuickFS.net: quickfs.net/?via=nathan.
BUSINESS INQUIRIES
- If you're interested in doing a collaborative video with me, having me on your podcast, or sponsoring one of my videos, you can email me at nathan@dividendgrowthmachine.com.
#dividendos #dividend #dividendstocks
DISCLAIMER
This is entertainment only, not investment advice. All opinions expressed are my own. Any stocks or ETFs mentioned may be owned or taken a position within the next 48 hours. Neither the information nor any opinion expressed it so be construed as a solicitation to buy or sell a security of personalized investment, tax, or legal advice. This is prepared for informational purposes only. It does not address specific investment objectives, or the financial situation and the particular needs of any person who may receive this report. The information herein was obtained from various sources. Dividend Growth Machine LLC does not guarantee the accuracy or completeness of the information provided by third parties. The information in this report is given as of the date indicated and is believed to be reliable. Dividend Growth Machine LLC assumes no obligation to update this information or to advise on further developments relating to it.
Fine, I'll hold onto my 130 billion.
😂
Excellent video - this channel is a gem.
Great content.
This video is so right. I am a MD sold almost all my stocks in January 2020 at the top. I knew covid would be huge. Unfortunately I waited way too long to get back into stocks. By the time I repurchased was above where I had sold most things. I am sure not smart enough to know both when to get out and when to get back into market.
No one is, don't worry about it! Just stay invested and you'll be fine! :)
You have made a great point.
Great clarification at the beginning about the difference between cash for emergency funds, savings, etc. and cash for investing. Thanks for the analysis Nathan! 👍
Glad it was helpful!
Berkshire Hathaway is sitting on a lot of cash waiting for the right time / opportunity to invest.
Cash is just a sub-type of bond. Do you have bonds? What time to maturity (or duration)? If you look at BND, it has 40% annual turnover and an average of duration of 6.5 years with an average effective maturity of 8.9 years. This means that in addition to the nearly 1% cash, holders of BND have a significant amount of short term and very short term bonds, or what I would call "cash equivalent."
Bond funds are an execrable investment so I don't do much in any significant duration. I have 2.5% in bonds that are longer than about 2 year duration, and 16.5% in short term bonds including cash or cash equivalents (that is everything other than my checking account, including cash value in my life insurance). I think I need another 1% to 2% in cash as I head into retirement, but barring a major market drop in the next few years I expect this will be my peak bond + cash allocation as dividend income now exceeds my expenses and I'll be eligible for social security in a few years (but don't intend to claim until 70).
Hi Nathan. I enjoyed your video "5x Returns with Half the Risk [1928-2023]." However, I do not know how to apply the two economic indicators you mentioned to my charts - real retail sales growth and industrial production growth. How can I apply this data on TradingView charts? Thank you!
Excellent advice what your advice on short term CD’s Treasuries laddering if need while getting 4 to 5%
thank you
Makes sense to me. Might as well get extra % if you don't need it.
I sold about half my portfolio and I'm buying 6 month T bills. Every week for 8 weeks and then I'll transition back in depending. You just can't beat over 5% to wait.
hindsight...bad idea
Sure was thank God I decided to keep my index funds I really would have missed out even more.
@@hammer49946 good good
I would like to suggest to you to review SPYI let me know if you like this ETF
Holding 10% just in case of market meltdown.. Shiller PE at 30 does not give me confidence
Schiller PE in context of interest rates is important
I do hold a small amount of cash, like $100 for potential account fees at the end of the year. Other than that, I do invest in a money market at the moment and issue cash secured puts against that value.
Buffet holds $130B in cash...should I? Yes, but unfortunately I forgot to cash my $130B paycheck...lol. 🙂
🤪
If you hold cash waiting for a major drawdown that may come 10 years out, your required rate of return will have to be so much higher than the market’s in order to justify the lost compounding. Most people won’t beat the market trying to time it, they’ll vastly underperform their own factors they use in their strategy.
This is spot on 💯
I'm saving cash for a different reason. The current capital flight from smaller banks have some banks and brokerages giving juicy bonuses for parking 5-100k with them for minimum periods of 60-90 days. E.g. one I'm doing now gives around $450 for 5k, minimum 60 days. So if you just rotate your cash around, you will end up with yields way higher than buying stocks. Additionally, some of the big banks and brokerages let's you use said cash to buy CDs or ETFs like $TFLO, compounding the benefits you can get.
Great vid!
I prefer zero-cash. I do rebalancing, so I'm benefitting from temporary down swings of my assets by buying into them from gains I get from my winners of the moment.
I only keep cash when I plan buying a stock whose technical analysis tells me it's trending down.
I am holding most of my cash in a US treasury money market fund yielding 4.8%. Cash I have for paying monthly bills is sitting in an online Capital One savings account yielding 4.15%. Cash paying my American Express credit card is sitting an online American Express savings account yielding 4.0%. I tried placing money in a 6 month CD at a local bank but interest earned with my online savings accounts above the CD rate.
So much common sense. DCA every month no matter what is happening, rebalance once a year and ignore all the noise by all the financial managers. Thanks Nathan!
Thank you Adam!
Extremely well said and explained. The timing was helpful for me. I've always had a difficult time hanging onto cash because I always invest it all. However, I currently find myself 5% in cash which has never happened. It's easy to do these days when Fed Money Market are paying close to 5%. You have got me back on track. Thanks for the assistance and coaching!
5% is fine if you have an intentional reason for it like you think t bills are attractive. I just don’t like earning 0%waiting to invest in something
@@NathanWinklepleckCFA No reason for me to hold the cash. Just have gotten lazy I think :-)
Hi Nathan, if I bought your valuation course, will I be eligible to access your member only videos too?
Patreon gets access to all. I’m getting ready to make my own community
@@NathanWinklepleckCFA I only paid for the course which cost $99, but I'm not subscriber to your patreon. I sent you email for further inquiry. Thanks!
Something I’ve been thinking about lately is how historically the sp has returned around 7-9% annually depending on how you look at it. This as been the best investment the best form of passive investing long term. But theoretically (not saying it would happen) if all the companies in the world were not doing well, what would be the next best thing for passive investing (like not rental properties or anything physical that requires you to actively develop or maintain)? Bonds? CDs?
Why not diversify your portfolio into the different assets you mentioned in the first place (e.g. shares, bonds, CDs, etc.), instead of zig-zaging between them if or when shares are not doing well?
Also, even if your hypothetical scenario plays out, history indicates companies (and the share market) would always bounce back after a period of weak performance. So if you are investing for the long term, you'd likely be better of staying invested than going in-and-out of the market.
@@uberboiz I don’t think US companies will do bad in the future. I was more thinking along the route of it you couldn’t invest in stocks or the opportunity wasn’t there, what would be the best alternative?
Just curious. Not actually considering it
i tend to temper around market highs, and (like now), and push around the lows, but always monthly dca, (only wish id started earlier, i find the gains after a drop mesmerising), still, but i know the dips are mathematically better, human nature i guess, great work Nathan
Thanks! Appreciate your support
I have an emergency fund, that’s the only cash I hold
Thank you so much for the great video! What do you think about dollar cost averaging into a 60% stock 40% bonds portfolio and when the market falls more than 30% or so, swap the bonds to stocks, and from that point and on keep DCA into stocks. That seems like a good strategy psychologically for people who start investing when the market looks like it’s at the peak.
Make sense to me!
It maybe could make a difference for cyclical and volatile stocks related to commodities.
Perhaps... I don't tend to like those commodity stocks much because of those unrelated cyclical factors... but that's just me!
Always hold 2 or 3 years worth of cash outside of your retirement accounts so you can ride out a bear market and not be forced to dip into principal. With higher interest rates now available regarding Money Market and CD you can hold some additional cash outside of your retireement accounts to give you additional peace of mind. Interest rates paying 4 to 5 percent are nothing to scoff at
Thank you Nathan, you made very valueable poinnts in the video. Especially the first one illustrated me a thing I was not aware of.
Nathan where the flip is the final round dividend champion video ??
😂 keeping it for a rainy day!!! Nah, I’ve been working on a 🔥 course for intro investing collab with Whiteboard Finance and Monday presentation for biggest account of my life. Next week maybe something on the next round?
I have 10% cash because i get 5 percent on it and note that for market returns more than 5 percent its not worth the risk. But upon review i think i may need the money within 5years so its not included as my investment pool. Thanks for the insights!
I’d view that more as an allocation/investment decision than holding onto cash for speculative purposes to buy a stock with it.
@@NathanWinklepleckCFA Interesting distinction. As of today I'm running 63% stocks (S&P fund + discrete), 26% bonds and 11% money-market. I would have called that 11% my cash. If the rates fall I would probably move it into the other two. That interest is some strong gravity.
Definetly should hold cash, especially with money market accounts paying 4.5%.
I’d view that more as an allocation/investment decision than holding onto cash for speculative purposes to buy a stock with it.
A 10yr horizon seems excessive to hold cash. I could see maybe 5yrs... but closer 3yrs is reasonable. That said, its all about your time horizon when you'll deploy the cash.
100% agree.
Thanks!:)
I like to build up to 50% cash and feed it into the market as it drops.
Ideally inwould be zero % cash at the bottom of the market.
It is a mechanical method i follow not so much market timing.
As long as it works for you!
@@NathanWinklepleckCFA
Takes the emotion out of investing. I just trade price.
In your video you say hold cash for up to 10 years.
I am retired now and if I will spend 5% of my savings per year ( 4% is the max recommendation), 5% x 10 years would be 50%. I am way under that , and the amount of cash I hold goes down as markets retreat.
Prior to 2000 and 2008 I was heavy cash from selling prior.
By 2002 and 2009 I had minimal cash in my account.
Well, during covid time. FTSE was down around 50%.
Possibly the reason it’s not shown in this chart that the market was up later on that year.
Someone can argue that they can keep the cash before the crush and buy immediately after the crush.
I’m this example, but immediately after covid 19 and gain astronomical gains
Would people actually invest when market down that much? Easy after the fact but not during. I have my doubts
Can we talk about what price to buy X stock at? I want to tell when a stock is on sale and is a good price, not overpaying.
Using PE ratio, everything is at least 10 PE, so I don't think PE can help indicate a good watchlist price
No, PE is terrible
Personal financing is "personal". If holding cash can give you a worry-free sleep, then keep some. In investing, cost-averaging and holding them through thick and thin is the best approach in my opinion.
Well said!
What is the amount of the base rate?
About 70%
Buy and Hold is a strategy and I cannot say it is bad. Your three models are interesting and you did work to compute the results. Sometims I believe the many technical indicators are a waste of time. Our portfolio is heavily dividend oriented with tickers such as MPW and JEPI. We have your top four Dobermans also at 10k each. After reviewing this video on the three studies, I think I will modify our strategy from 75% dividend to 50% putting thge 25% difference into SPY with a covered strangle at 15 delta to pick a little extra. Any commnet you might say is welcome. Positive or Negative. Robert P.
Sounds complicated.I don’t understand delta at all even though CFA program has it. I said I’ll just miss the question 😂
@@NathanWinklepleckCFA We appreciate your videos. The Greeks are criteria we use to determine probability and premium decays. But complicated. Please ignore my comments as we made the wrong assumption that you also used them .
Now do an experiment where one uses monthly DCA, and a second accumulates cash until a >15% drop, goes all in over the next 3 months then accumulates again, and the third person does the same but waits for a 30% drop and goes all in over three months then accumulates until the next 30% drop.
Good idea!!
Great video and Channel. Would you consider the recent monetary expansion/ inflation to cause your theory here to be flawed? Have we reached an event horizon type of end game scenario with regards to credit expansion/ debt that may cause this data series to become invalidated? Thanks and keep ‘em coming
You mean relating to government debt?
@@NathanWinklepleckCFA yes
Last reason is 💯the truth.
Thanks!
I think your age has a lot to do with it. At 68 I’m 35% cash, 35% metals, 30% in equities. Cash is held in the highest paying treasuries and a couple CDs. Getting over 5% overall.
Gold to protect against dollar devaluation. Cash to protect against deflation. Equities split between dividend and unloved energy and firms that own(but not run) bulk carriers. So far so good.
So you’re saying cash is a part of your asset allocation? Makes perfect sense to me. I mostly oppose cash as a timing mechanism
@@NathanWinklepleckCFA Yes. Thanks for asking. I roll the CDs and ST Treasuries. Keep the MM for liquidity but not for market timing. I have an investment portfolio. And an all cash investment portfolio. Dividend income from all sources is about $1000 per month and rising. I do have a totally separate portfolio 100% focused on mining. In that I am sitting on about 25% cash as well, waiting (hoping lol) for mean reversion to eventually kick in. That was a portfolio I had with my dad. It was his money, but mostly my picks. We both knew any or all could go to zero. I inherited it when he died so I don’t even count it in my NW calculation. It’s memory fun money. So the cash in there is for market timing, but it’s a small amount and all for fun and hunting the 1 in a million hundred bagger.
If the Dow/Gold ratio ever gets to 10 I’ll get interested in general equities again. If it gets to 5 I’ll sell 50% of my gold and buy some blue chips. Otherwise, we are cash flow positive every month ( without counting any dividend income) and at our age see no reason to take a lot of risk.
The value that cash brings is liquidity as well as a way to rebalance in a bad year. Timing the market makes little sense unless you work in the government and know the bills that pass where the companies and industrial impact that the laws happen. Someone could make a portfolio solely based on owning the industrial allocations based on what lobbyists are meeting frequently in Washington. That is all. Hence why small purchases over time make sense because we are outsiders. If you bought at the highs of 1929, you would have had to wait 20 years for the appreciation to get back to the highs. My rule with cash is to never rebalance down though. You use it to rebalance into it. Typically with the riskiest assets, it makes more sense to buy and maintain a minimum price amount. So right now my current risky portfolio is basically buy in a small amount each pay day, then when one goes below the minimum, I take the cash and bring it back to that amount. I am more of an adventurous and experimenter when it comes to stocks. So I took the Sortino ratio of each stock in the IBB and bought the highest one. I have another calculation too but that may or may not be something that is worth noting here. I am testing it out right now. I have no idea if it will be great. Time will tell.
Below the minimum? What do you mean?
@@NathanWinklepleckCFA For Example, if I bought MRNA because it is insanely cheap, and it goes down 10% after I bought 600 dollars of it, I would buy it back to the 600 dollars. It can go down more but it limits an individual from going all in and putting to much into one basket as it can still go down and if it does, you do it again in a month. It is a mild departure from the efficient frontier but it psychologically works well.
👍
The S&P has gone no where in the last two years yet my money market has gained 5% - some amount of cash is no longer a negative when you look at your total portfolio.
Maybe then you’re saying cash a good investment?
@@NathanWinklepleckCFA Yes indeed it is for me because maximize my cash by increasing my spending power abroad in emerging economies in asia,central america etc.
Another excellent data driven podcast …..being retired I need to keep quite a bot of cash as don’t want to run short during a prolonged market slump.
Just Harvested Gains 📈 from October ans January Investments. ...
?
Unless it's in a high yield savings I like to let my money work for me and compound.
High yield pretty tempting eh?
This video is quite misleading. Your video title suggests this is for us individual stock pickers but the video content is for dollar cost average index fund investors.
It suggests stock pickers? How?
@@NathanWinklepleckCFA you’re talking about Warren Buffett’s cash pile in the title. Edit: oh did the title change or did I hallucinate?
@@DennisFinancialDoctor No, you didn't lol I changed it because every comment was talking aout the title and not the video content so I thought it was too distracting ;)
I've always thought it foolish to wait for a "buying opportunity". It usually leads to one siting on the sidelines as the stock goes up. It's great to actually see quantitative evidence supporting this.
However what about those already retired. We are not in the accumulation phase. Your statistics are revealing. These statistics must be emphasized. Also you might indicate how you get information back decades.
Yes, 100% stocks and no cash wouldn't be wise for retired person, but assuming you had adequate asset allocation I don't see why you would need to hold an excess amount of cash? Obviously a bigger emergency fund if your income is more volatile, but I'd think your income would be less volatile considering Social Security, pension, etc.?
@@NathanWinklepleckCFA I support you answer to @glendavis1266's comment. I am early retired and have pretty much everything in equities. But I am also receiving more than enough in dividend income to cover our expenses. When we begin collecting Social security and pensions in a few years we won't be relying on those dividends as much. In my situation I see no need to have any cash set aside in my investment accounts. But we do have a small cash stash set aside to cover any unbudgeted situations that may arise.
Buffet I guess needs purchasing power to buy companies rather than DCA into the S&P
He also has tons of insurance obligations…
Actually true cash in brokerage pays less than most savings accounts. That’s true cash liquidity, not investment.
Of course! Where is my money?
lol
That graph at the end is very misleading. You compare the results of. Hypothetical investors investing 1k per month and you show how all 3 investors did well. But 1000 was an astronomical sum at the time! What was 1000 per month adjusted for inflation at the start of the study? Especially when you consider an average persons working life spans maybe 30 years. It’s just not realistic.
Inflation adjusted so no that’s not true
And the fact that most people invest far shorter was mentioned and it further the point that the gap would be even smaller than shown here
@@NathanWinklepleckCFA 1000 dollars per month for 95 years means you invest 1140000 over the life of this hypothetical investor. That yields about 9 million. However, investing 1k per month today is way different than 1 k in 1928. AThat’s a huge difference.a more realistic comparison would be someone investing 15% of their post tax income.
I put $0.0 in my etrade but it yelled at me so I put back $4.99
I hold as much as I can.
Percent?
@@NathanWinklepleckCFA Currently it is down to 5% in the actual portfolio. I have other reserves in accounts but I don't think of a number to hold because I am more of a value investor. If my portfolio say has 30% cash because I can't find any good deals on companies I will leave it and wait. Then when the chance comes I buy hard.
Well I would love to hold $130b hehe ... help a bro out!
😂
The headline is funny. Absolutely, *i* should hold $130 billion in cash - not bad for pocket money.
😂
so the cash portion of your portfolio is just a 6month emergency fund?
Yeah pretty much
@@NathanWinklepleckCFA ok 👌
What is the percentage of cash in his portfolio?
$130 billion so 18% of total market cap.
Disagree..Im making 4.5% in my money market account, and sell CSP’s with the money.making over 12% on my cash..
I’d view that more as an allocation/investment decision than holding onto cash for speculative purposes to buy a stock with it.
VMFXX has been yielding over 5%.
Great content ! I hold my 130 billion in the form of ice cream in the freezer.
Hahah you seriously made me laugh with that one 😂
Unfortunately, I'm only holding $129 billion in cash.
😆
I wouldn't mind having a $100 Billion in cash.
You don’t?!?!
@@NathanWinklepleckCFA no on a serious note your videos are awesome and ridiculously helpful, it's really helpful when you discuss the behavioral side of investing.
Reason #4: your money won’t grow if it’s just sitting there waiting to be invested…
Ofc, if Buffett has 130 billion in cash, we all have 😂
You don’t?! Haha
@@NathanWinklepleckCFA i have about 131 billion in my matress 😉
Portfolio is up 48% YTD thanks to some well-timed options plays on TQQQ and RIOT. Liquidated those positions and rolled the proceeds into more SCHD and a 30% cash position via SGOV (money market substitute), which is currently yielding about 5.1% with the latest rate hike.
Although I wouldn’t say I’m “out” of the market since SGOV and SCHD are collateralizing cash secured puts on new individual positions.
Options premium proceeds, interest from SGOV, dividends from SCHD and any new capital go toward buying more SCHD or SGOV.
With more rate hikes being projected by JPow, a CRE melt down on the horizon, possibly more bank failures coming, and the extreme extension of QQQ being held up by only 7 companies, I’m a little more defensive than usual to say the least!
When we hit max pain and the first rate cut finally comes though… watch out above! I wouldn’t want to be out of the market then!
This idea is fine while the economy has population growth which equals economic growth.
Id be cautious of growth in population decline. Might be 30 yrs away tho ha
Nick from of dollars and data said it best that even God can't beat dca
God would laugh at the absurdity of that comment