I think there is no way to have the perfect plan. The future is too variable. Even if your life is relatively normal and event free, you won't know a lot of things of what your future life is going to be like. Your plan needs to be both a fixed and flexible component. For me, the fixed component is that tried to save regularly and immediately invest the money (as part of 401K) and I stay invested. Now that I have kids, I also save for their college since you must adjust for life changes. Make adjustment not due to the market condition but due to life conditions. You have a goal that you aspire to but you have to re-evaluate it to see if it has changed.I read somewhere else that it is better to have a plan that might be slightly suboptimal but one you can stick to, rather than optimal but you can't stick due it went the seas get rough.
I agree with this idea also. Sure, cash drag is real and can be quantified when looking at my portfolio returns but it is seemingly quite small relative to the damage that is possible from one behavioral mistake I could potentially make during stormy times in the market.
The only time I felt "bad" holding cash was during ZIRP, which lasted way too long imo and really punished anyone holding cash reserves.
As for allocation, it's more of what you are willing to trade off. For most of my inesting life, I have stuck to 100% stock, but now reducing the equity as retirement is getting closer. In the past, stock market crashes does not cause me to lose sleep, but losing my job would because I live in the present. I do hold cash for that reason and is good for partitioning. I want to not ever dip into my retirement funds until I retire.
There are comment about Buffet holding cash, but I think this is mostly because he has nothing to buy. However, few of us have Buffet's ability to invest, so holding cash on the sideline is probably going to end up being a drag. Keep in mind that keepiing bonds is also a drag, but again that would be your choice. They important thing is to make sure you can reach your preceived goal.
Statistics: Posted by gavinsiu — Fri Mar 22, 2024 11:34 pm — Replies 85 — Views 5382