Author Topic: Do you count cash/emergency as part of your asset allocation?  (Read 1808 times)

retireatbirth

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Do you count cash/emergency as part of your asset allocation?
« on: January 22, 2018, 07:59:18 PM »
When people talk about 80/20 or 90/10 or whatever, is cash and an emergency fund included in this? I'm planning to keep about $10k in cash and another $20k in muni funds as my emergency fund. Should I count this in my overall asset allocation or do I just look at the remaining portion?

My portfolio aside from those funds is about $300k so if I'm looking at a 90/10 allocation, it's the difference between ZERO other bonds vs $30k in bonds (in addition to the $30k emergency fund).


Indexer

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Re: Do you count cash/emergency as part of your asset allocation?
« Reply #1 on: January 22, 2018, 08:08:08 PM »
Emergency fund isn't included in my AA.

steveo

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Re: Do you count cash/emergency as part of your asset allocation?
« Reply #2 on: January 22, 2018, 08:35:25 PM »
I think you should include it but I don't at this point. Still I don't really have an emergency fund. I put $200 every pay into my emergency fund but it's always being spent.

JAYSLOL

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Re: Do you count cash/emergency as part of your asset allocation?
« Reply #3 on: January 22, 2018, 09:00:39 PM »
I have a small cash emergency fund, i count it as part of my NW, but not AA

Mighty-Dollar

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Re: Do you count cash/emergency as part of your asset allocation?
« Reply #4 on: January 23, 2018, 01:47:44 AM »
Vanguard's nest egg calculator includes cash, so yes I'd include it. It's part of your savings. https://retirementplans.vanguard.com/VGApp/pe/pubeducation/calculators/RetirementNestEggCalc.jsf

Kalergie

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Re: Do you count cash/emergency as part of your asset allocation?
« Reply #5 on: January 23, 2018, 02:05:22 AM »
Vanguard's nest egg calculator includes cash, so yes I'd include it. It's part of your savings. https://retirementplans.vanguard.com/VGApp/pe/pubeducation/calculators/RetirementNestEggCalc.jsf

Do you know if Vanguard assumes that you use the cash as an emergency fund or for buying opportunities during a bear market?

Villanelle

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Re: Do you count cash/emergency as part of your asset allocation?
« Reply #6 on: January 23, 2018, 02:23:40 AM »
I guess it is a matter of semantics.  Technically, my AA, as tracked by The Speadsheet, doesn't include cash.  And I don't have a set % of our AA that I want to be in cash, so that makes sense.  As our net worth/stache grows, I don't feel a need to increase our cash holdings.  If anything, the opposite is true.  So it would be weird to track it along with the % I want in domestic large cap funds, because it doesn't really work as a % and I'd be constantly adjusting it downward. 

aboatguy

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Re: Do you count cash/emergency as part of your asset allocation?
« Reply #7 on: January 23, 2018, 08:05:12 AM »
I count the money in CDs as part of my asset allocation(3% apr capped to 3K and 2.5% capped to 50K (only the former account is currently maxed).  I don't count the Money in my high interest savings accounts (currently 1.4% apr so not so high)

My reason for differentiating them is I don't have plans in the immediate/foreseeable future for the money in the  CDs, whereas the money in the savings accounts is for short term emergent (opportunities)  IE we pulled 13K at the beginning of this month to max our Roth IRAs for the year. 

However, I'm probably an outlier since I already draw a pension that exceeds our living expenses and bank/invest my entire current salary. My pension dies with me so our stache is in case wife survives me by decades.

The CD have specific purposes (IE we have: roof replacement fund, air conditioner replacement fund, window replacement fund, etc) so they may be considered emergency fund by many folks IMHO they are proper life planning funds......

Mike

   

Retire-Canada

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Re: Do you count cash/emergency as part of your asset allocation?
« Reply #8 on: January 23, 2018, 11:06:27 AM »
When people talk about 80/20 or 90/10 or whatever, is cash and an emergency fund included in this? I'm planning to keep about $10k in cash and another $20k in muni funds as my emergency fund. Should I count this in my overall asset allocation or do I just look at the remaining portion?

My portfolio aside from those funds is about $300k so if I'm looking at a 90/10 allocation, it's the difference between ZERO other bonds vs $30k in bonds (in addition to the $30k emergency fund).

If it's money you hold with no plans to spend it I would include it in my AA calculations.

Fomerly known as something

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Re: Do you count cash/emergency as part of your asset allocation?
« Reply #9 on: January 23, 2018, 05:35:38 PM »
It is and it isn't.  I keep a fixed amount of cash in part as a hedge against the market.  It is a fixed part of my asset allocation but not as a percentage as the amount basically does not change as the market gains.  I have decided in the past to make the fixed amount larger but again not in comparison to the rest of my portfolio.