Investing in "Cash"

[Anonymous]

Over the weekend I was going over my brokerage and IRA accounts and trying to make sure I have a good mix... Specifically on my IRA I figured it would be good to have a pretty much risk free, yet semi-decent earning to ensure any fluctuations don't hurt bad. I bought into some money market funds that seem to have a return of 2.8% average.

Does this seem like it was a good move for stability? It's not my entire portfolio, just a new part of the mix. Still very new to investing and sticking really to mutual funds for now.

[CBartowski]

I'm no professional but yes that sounds like what divsersification is, havings funds in various financial instruments. I'm taking similar action.

Out of curiosity, which MM did you use at 2.8%?

[M_Smart007]

---

@Anonymous wrote:
Over the weekend I was going over my brokerage and IRA accounts and trying to make sure I have a good mix... Specifically on my IRA I figured it would be good to have a pretty much risk free, yet semi-decent earning to ensure any fluctuations don't hurt bad. I bought into some money market funds that seem to have a return of 2.8% average.

Does this seem like it was a good move for stability? It's not my entire portfolio, just a new part of the mix. Still very new to investing and sticking really to mutual funds for now.

---

I need Growth, so I am

80% into T. Rowe Price Blue Chip

20% into Vanguard Growth Admiral Shares

21.254% Year To Date Return (Combined)

Fidelity Blue Chip Growth Fund Paid For Most of My Daughters College. woohoo!

I have tried a Lot of Funds over The Years, Blue Chip Growth Funds are Hard to Beat.

but if you are close to Retirement, or can't stomach the fluctuations,

Sometimes AAA Rated Bonds / Money Markets / CD's are The way to Go.

I would always keep a small portion for Growth, depending on what your Immediate needs are. and time frames.

Diversification is Key. less Risk!

No professional Advice here, Just some  Experience and Learned Mistakes

[iced]

---

@Anonymous wrote:
Over the weekend I was going over my brokerage and IRA accounts and trying to make sure I have a good mix... Specifically on my IRA I figured it would be good to have a pretty much risk free, yet semi-decent earning to ensure any fluctuations don't hurt bad. I bought into some money market funds that seem to have a return of 2.8% average.

Does this seem like it was a good move for stability? It's not my entire portfolio, just a new part of the mix. Still very new to investing and sticking really to mutual funds for now.

---

There's a general rule-of-thumb going around that says you should have about 1% per year of your age in something like bonds/MM/cash to mitigate risk. The idea is that as you get older, you tolerate less risk in your portfolio, so you slowly ramp up your low-return-low-risk funds. In today's market, that number's a bit skewed and I'd say it's more like 1% per ~3 years of your life, then at retirement shift toward something around 60% stock/40% guaranteed if you have less to lose or stay where you are if you're going to be able to withdraw 4% or less annually.

Even then, if you're a 25 year old just starting out, parking even 10% in a low-yield MM/cash/guaranteed fund is not working in your best interests. You have 40ish years to retirement and can weather any downturn at that age. If you're 55, being 10-20% in MM isn't the worst idea, depending on your portfolio (see above).

What you *do* want cash for is to buy into downturns, though depending on whether your brokerage does reinvests on dividends or not, you may or may not already be accumulating cash over time for such occasions. The decision then becomes when to buy back in.

A better means of diversification is to break out your sectors and regions. Don't be all-in (except your guaranteed cash/MM) on a S&P ETF or target-date fund or such. Make sure you're spreading out more. S&P funds are great, but they're large-cap tech heavy - maybe consider putting a percentage into a sector-specific ETF, some small and mid-cap ETFs, an international ETF, etc. If 80% of your portfolio is in large cap institutional ETF or mutual fund, you may think you're hedged since you're spread across the S&P 500 a tech collapse, though unlikely, will wipe out a significant margin on that fund. You can Google S&P weightings to see just how heavy tech runs within it.

[Anonymous]

---

@Anonymous wrote:
Over the weekend I was going over my brokerage and IRA accounts and trying to make sure I have a good mix... Specifically on my IRA I figured it would be good to have a pretty much risk free, yet semi-decent earning to ensure any fluctuations don't hurt bad. I bought into some money market funds that seem to have a return of 2.8% average.

Does this seem like it was a good move for stability? It's not my entire portfolio, just a new part of the mix. Still very new to investing and sticking really to mutual funds for now.

---

If you're at or near retirement, yes.

[Anonymous]

@M_Smart007 you can handle my investments but let me keep my monies that are for precious metals (high risk but can be profitable).

[M_Smart007]

---

@Anonymous wrote:
@M_Smart007you can handle my investments but let me keep my monies that are for precious metals (high risk but can be profitable).

---

well, i have a few rolls of Silver Dimes, does that Count?

Take Care My Friend

and I do advoctae having at least 10%-15% in Physical Precious Metals. probaly around 60/40 (60% being Gold)

[wasCB14]

Bonds are not necessarily low risk. We've not had very high interest rates for decades, but that doesn't mean they can't potentially return.

An age-based formula fails to consider asset valuations, health, the needs of a spouse or children, risk tolerance, etc.

[iced]

---

@wasCB14 wrote:
Bonds are not necessarily low risk. We've not had very high interest rates for decades, but that doesn't mean they can't potentially return.

An age-based formula fails to consider asset valuations, health, the needs of a spouse or children, risk tolerance, etc.

---

I would see health and family needs to be a determinator of amounts, not time. That is, if I need to leave money to my kids, that should affect how much I save, not how that money's parked across bonds and stocks.

All the age component does is act like a stopwatch so we know when to run, when to walk, and when to hold on with both hands. Poor health could skew that number downward, but it doesn't change the fact there's still a slide from higher risk tolerance to lower risk tolerance as the need for that money becomes more immediate.

[wasCB14]

If a man marries a younger woman, she might live 20 or 30 years after his death (not in most cases, but it's not rare, either). If stocks are fairly priced, keeping a large stock allocation currently may be advisable. She may need the money from the capital appreciation in the future.

Maybe a couple's children are all healthy and earning a decent income. They could give their parents help in an emergency. That frees older people to invest a little more aggressively, perhaps paying for grandkids' college.

Maybe someone is fortunate enough to be leaving a taxable estate. Keeping a large amount of cash to pay the taxes can make settling the estate easier, even if it means slowing the growth of a business.

Cash flow needs and timing are major considerations when investing. There's just a lot more that goes into them than age.