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What's the best way to park cash in a TAXABLE ACCOUNT (the cash that you may deploy within months (or could be more than a year depending the market situation) to buy equity mutual funds/stocks for your asset allocation?
mathjak, I think you mentioned you used some short term bond funds like MINT to park cash? Were you talking about taxable account or tax sheltered?
I always thought it's better to earn dividends and pay tax on it than to not earn dividends at all, but still, it's better to minimize taxes, esp. if the dividends may push you into a higher tax bracket...
You didn't say what do you want achieve with the parked money
I said it's money waiting to be put in equity funds or stocks. It's a waste to leave it in the money market without virtually 0 interests. Money have to be put to use to make money, but I don't want to throw it all in equity at once.
I said it's money waiting to be put in equity funds or stocks. It's a waste to leave it in the money market without virtually 0 interests. Money have to be put to use to make money, but I don't want to throw it all in equity at once.
It's also a "waste" to let it sit on the sidelines vs. buying shares now. Are you some market guru with a crystal ball waiting to time the market? If so, good luck....that's a means to an end.
a popular strategy now is a rising glide path in to retirement . you drop to a lower level of equities entering retirement and gradually increase them over the next few years reducing the shock of an early stage down blast .
with the outcome of an entire retirement period influenced by just the first 5 years and fully determined in the first 15 years there is not a whole lot of time in some circumstances early on.
you can have the best 2nd half ever but if the first 15 years are poor the retirement is toast . that is what happened in every worst case scenario . the first 15 years did them in .
while 15 years is a long period of time , 5 years is not and the first 5 years outcome carry's a big influence .
so that is why folks are concerned about sequence's in the early years .
so you don't always want to commit every dollar early on as part of a strategy . it is the reverse of a conventional glide path where as you spend down and get older equities reduce . in this case you enter retirement with a lower allocation when stock valuations are high and over time increase them hopefully catching bigger gains down the road with higher levels of equities , while protecting yourself from the most dangerous point which are when you first start retirement spending before an up cycle .
spending down early on in to poor sequencing has the same effect of traders having a string of losing trades up front.
Timing matters. If you had parked your cash in a bond fund last spring or summer and then decided to use that money to buy stocks right before election day, you might have realized that it wasn't as "safe" as you thought. For a period of a year or so I'm perfectly happy to collect 1.05% from Ally Bank knowing that my balance won't shrink. The difference in income between a secure savings account and any bond fund for that period of time is not worth the risk to me. Other folks have different opinions.
i never believed in trying to play all or nothing by counting on some downturn at some point . usually it ends up you lost more or gave up more preparing for this event than the event ends up giving you .
i did go to a more defensive portfolio before the election which could make money up and down . it did pretty well while still bringing in nice gains in long term treasury's and gold while stocks stalled for months .
now i started easing out of it this month and going to my more conventional models once again . but i would not do an in or out attempt . i learned decades ago about trying to do that and watching the money i gave up keep growing while i waited for an event that came and went before i committed to going back in .
It's a waste to leave it in the money market without virtually 0 interests.
Obvious typo: meant 'with' instead of "without".
Quote:
Originally Posted by Florida2014
It's also a "waste" to let it sit on the sidelines vs. buying shares now. Are you some market guru with a crystal ball waiting to time the market? If so, good luck....that's a means to an end.
Precisely because I'm no market or investing guru, I don't feel comfortable to throw all the cash into the funds/stocks I have chosen. What if some of them become big losers?
Thanks for all the comments, but so far all/most comments didn't address the key issues I meant to address, viz. the tax.
Unless you are a long term investor you shouldn't be buying equities.
Who cares about the short term. At some point in the short term everything will have losing years. In fact from 1970 to present 33% of all the years have been losing years for equities.
Do you really think when i started in 1987 it matters today where we were?
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