This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration. Need a new registration confirmation email? Click here
I concur. Long-term investors who try to time the market or invest on the basis of sentiment tend to do more harm than good.
buy, hold, reinvest dividends and buy more makes perfect sense for most long-term portfolios. This approach, however, can ignore time, circumstance and the personal component of investing.
Investment advisors often attach model portfolios to different types of clients; If you're 37, married, live in a two-income household and have a young child, follow this strategy.
How many pros actually sit down with clients and discuss unique goals and the practical ramifications of a customer's financial reality?
If you're dealing with folks in the sub-$1 million category, quantity matters so you churn and burn model portfolios. Few people ever question the advice.
Smart investors should.
I relay details of my own personal situation to help illustrate the notion that nuance exists in personal finance. When we share personal experiences we help others, even though we're not necessarily telling them what to do. If nothing else, my willingness to disclose might lead a few readers to assess their own unique circumstances and find my thought process useful in informing their own process.
Why I'm Transitioning to 80% Cash
I'm the 37-year old guy, married with a young child in a two-income household.
As much as I believe in the power of stock investing, particularly dividend-paying growth stocks, I did some near- and long-term planning and came to somewhat atypical conclusions.
First, I thought about my primary goals, objectives and concerns. The things that keep me up at night, in no particular order, are:
I want the ability to retire and work only as much as I desire ASAP.
Put the kid through college.
Cut expenses as much as possible; reduce fixed expenses, but have the ability to live a similar quality of life in retirement; travel; work sparingly.
No debt and no rent or mortgage payments.
Given my relatively expensive choice of residence -- Santa Monica, Calif. -- all four points, particularly the last, present considerable challenges.
Here are some points to consider -- they are the same ones I considered as I came to my decision to move to cash. Each hinges on present and positive variables remaining constant.
We pay about $2,000 a month in rent -- a relative bargain given our location.
In less than a year, we will have, with the exception of pesky student loans (I got burned by the private student loan scheme), no debt. Even our one car will be paid off.
We have seen considerable monthly cash flow over the last two years.
We have a more-than-ample emergency fund.
Then I asked the following questions:
Do I really want a housing payment in retirement? Would I feel comfortable having a monthly commitment of thousands of dollars per month in my 50s, 60s, 70s and onward? Do I want to work to reduce and eventually eliminate a housing payment going forward?