With the addition of money market funds, such as CSH2, it’s got me thinking about this subject.
Emergency fund aside, I’ve always invested every penny as soon as I can
It’s never made much sense to me to keep cash as inflation erodes away at its value and I’m investing for the long-term so I ideally want to be in equities.
It does seem a more attractive proposition nowadays with the base rate at 5%. (Although, in reality, it’s not too different from when rates were zero and inflation was 2-3%.)
Part of me likes the idea of setting some dry powder aside for liquidity purposes.
That way, if a once-in-a-lifetime opportunity arises I can sell my liquidity fund to buy something else.
But it feels like trying to time the market which is rarely a good idea.
I’m minded to stick with plan A because the ‘if in doubt, do nowt’ adage has served me well.
However, I’d be interested in everyone’s thoughts.
Do you keep cash? If so, why? Is it a set amount or percentage? How did you arrive at that number?
Would have been handy in Spring / Summer 2020, but that was a once in a lifetime event.
For the average person with a long term outlook, I wouldnt give it too much consideration.
A needless and likely pointless luxury in all probability…unless you have bundles of cash to play with or a clear plan and a crystal ball.
I think this may be key. A lot of uber wealthy people seem to have 5-20% in cash but us mere mortals are probably better off investing the lot and accepting we’re not the second coming of Warren Buffett.
I have been keeping a small portion of cash available which I am likely going to put into CSH2 for a short period.
Ideally I would be putting that cash into US treasuries as a hedge against my other position but over the last year and half they have been acting in tandem with stocks and I am looking for them to decouple again.
In general im in the camp of of having all my money work for me in the market but I do realise my position currently almost contradicts this statement as I have looked at the recent trend in the bond market and made changes accordingly.
Appreciate your thoughts on this.
There does seem to be a bit of a herd mentality around money market funds at the moment and I can’t quite get my head around the rationale.
I think there’s an element of people jumping on the bandwagon late.
Money market funds are great as an alternative to savings when rates are rising quickly because it’s passed on right away.
But with rates beginning to plateau, the opposite may become true and people may find it’s better to lock in a fixed rate on their savings.
I have around 10% value in cash sort of. Most of it is in limited orders. So, technically is still cash. I could cancel the orders.
Usually keep my emergency money in an easy to access savings account. If the once in a lifetime opportunity arrives I take money from my emergency savings then the following months top up the savings account, worked well with the flash crashes during COVID.
In my main ISA I have around 40% cash in CSH2 - I’m using the ‘value averaging’ technique. So sell a bit of CSH2 & buy into my portfolio when (if) there is a better pricing opportunity. I still also buy regularly regardless of price - just not as much £ as when there is a better price.
I’m doing this on my ETF portfolio, not individual stocks.
my problem is I dont have enough cash to buy even 1 share in CSH2, i do wish fractional options were available
I had at least four these “lifetime events” in my investing career, so not sure that it is that lifetime.
Fair enough. I guess its all relative. Everyones circumstances and ideas of an opportunity are different.
Yeah - I hear ya, my main ISA is on Invest Engine so I can buy & sell fractions there.
Freetrade said they are looking at adding another 8 Money Market funds, so hopefully there will be a cheaper option available shortly.
XSTR is the alternative to CSH2. The difference is a higher fee and it distributes the income
That’s my plan fixed rate in savings but they expect a few more rises before a fall so hoping to lock in maybe Oct time but if it sounds like they will lower rates before this I’ll lock in sooner.
Can’t be ‘debanked’ you if you have cash!