Education When Cash Is King (William Bernstein)

When Cash Is King - HumbleDollar

Hardly new and not for everyone of course, but given my somewhat conservative nature it's what I always drift back to. Although not so much hoping for fire-sales nowadays, just like a good wad of cash on hand especially given our tendency to be less frugal nowadays and not wanting our lifestyle governed by market volatilty.
Performance wise likely not optimal but a great fit for us given our circumstances etc.

 

I have recently discovered it is very handy to have a wad of cash readily available although it focuses more on the life aspect rather than style.

In any event, I guess an argument could probably be raised both are a waste of money but I doubt it would be widely accepted proposition.

 

It's the same for any other asset, if you have enough I think it's a good strategy to cash some out.
1m = 33k PA for 30 yrs. If you own your PPOR you go no longer care that much about what goes up or down in price.
Life could get a bit boring though, so that may be a problem...

 

Good link @Nodrog, how does that article resonate with the early years of investing where you and others were trying to build investment assets whilst building up cash, I'm sure you guys didn't just sit on 200k waiting for a dip??? I am guessing dca and buying when the market was on the nose was on the cards or was all excess funds surplus to needs shovelled into lics and etfs?

 

Find another hobby

 

We didn't have spare cash @pippen. ETF's didn't exist but we invested in direct shares and Lics what we could. Investing for us also included education, ppor, property, business's and shares/lics. We also invested in our kids and their education - bit of a money pit that one but so very rewarding in many ways!
The mantra - Just invest what you can as often as you can and compounding will do the rest.

 

So no hoarding cash under the mattress in your household then @Islay . Seems to be the way with the long term old school investors, no need to be cute and wait and market time!

 

No, truth is we didn't start with a lot. We were young and just got on with things. We were lucky enough that uni was "free" because neither of us came from families that could help us. One of us had a cadetship that combined uni and work the other had a fulltime job and did uni at night. So just paying student union fees and buying textbooks was an investment in those days. Then all the "normal" life stuff happens but along the way we just kept saving as well. Hence the mantra of as much as you can as often as you can. Our 20 year old selves would never have imagined how lucky we would be in retirement

 

Sounded like a grind, well done and I suppose it makes it that much sweeter now enjoying the fruits of delayed gratification and remembering all that hard work and the sacrifices which have now paid off and having those army of dividends invested and reinvested and compounding year after year after year. Long live the passive dividend income stream!

 

It was just life @pippen. We were the generation of 17% interest rates etc but at the time you just got on with it and made it work. With rates that high you quickly learnt to be good savers and pay down your housing loan as soon as possible. Once a saver always a saver I guess!

 

Im a gold member when you talk about savings Partner and I can sock away around 8 to 9k a month, PPOR paid off for 5 to 6 years ago now, 38 now and super cap has been maxed out for past 6 years too so Vas and Argo and cash at bank filling up along with super portfolio and partner is into vas and vgs. It has just been an ingrained habit and we can't and don't spend what we earn and are happy so.....

 

You have already nailed it @pippen! We were a long way behind you. Well done

 

Now it is just a compounding game and sitting in a chair in a quiet room and keeping that chair warm....and staying healthy and enjoying the present also...

 

Different approach back then as we both had employment income and plenty of human capital available. Very different story when retired and human capital no longer there by choice or not.

 

You are at the point of “Enough”. It doesn’t make sense to me to be “all in” when you no longer need to be in my opinion. Personally I take some comfort from being debt free and holding some cash and bonds. It’s almost a psychological back stop that allows some much higher than market risk exposures elsewhere (ie. Med tech VC)

 

"Enough" nailed it albeit no interest in higher risk exposure elsewhere at this stage of life and due to "too hard" and more importantly lack of interest. Purely interested in life itself nowadays with less self absorption, a previous bad habit of mine.

 

Ah yes those were the days. And yes didn't complain, just kept plugging away. Whinging never did anyone any good. And today they say we had it easy but ignore that as it could be considered whinging.

 

I would think bonds would be a little more risky over the next 5-10 yrs than they were historically with interest rates at all time lows.
On the other hand there's the case that we could end up like Japan.

 

Inflation will be another problem. Even at RBA mid range target of 2.5%. 50% of purchasing power is toast after 30 years.

And if you want to see some sequencing risk on steroids as far as retirement funding goes just throw in an inflation spike early in retirement, even a fairly modest spike for just a few years will be enough for a scorched earth outcome.

 

When holding a bond fund of different durations the simple rule of thumb is that yield to maturity on purchase is the expected return, as interest rates rise the new issues added to the fund increase coupon while the price falls on the older issues still held. The risk aspect is overplayed imo given that capital loss in rising interest rate environment is compensated by higher yield.