Author Topic: opportunity savings  (Read 7567 times)

slugsworth

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opportunity savings
« on: February 27, 2012, 03:27:53 PM »
In one of MMM recent posts, 2/20/12 "getting blood from a stone", he argues against keeping a large emergency fund.  Personally, I've kept a small horde of cash, I usually describe it as an emergency fund, but it also really more of an opportunity fund.  While I don't agree with everything that Mark Cuban says, I did really like this post http://blogmaverick.com/2011/08/04/how-to-get-rich-2/  and I was curious what some of the Mustachio's think of all of this, and the concept of an opportunity fund. 


arebelspy

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Re: opportunity savings
« Reply #1 on: February 28, 2012, 07:49:07 AM »
In one of MMM recent posts, 2/20/12 "getting blood from a stone", he argues against keeping a large emergency fund.  Personally, I've kept a small horde of cash, I usually describe it as an emergency fund, but it also really more of an opportunity fund.  While I don't agree with everything that Mark Cuban says, I did really like this post http://blogmaverick.com/2011/08/04/how-to-get-rich-2/  and I was curious what some of the Mustachio's think of all of this, and the concept of an opportunity fund.

His post boils down to "time the market" -- if you believe you can do that... well, good luck to you.

That being said, I don't disagree with the premise of your post, having opportunity money.  Apple and Warren Buffett do the same thing.  In fact, I wrote a guest post (not posted, or I'd link) about this very topic.

Having a smart asset allocation in general keeps your cash invested (unless it's a specific part of your AA, like the 25% cash in Browne's Permanent Portfolio), but also having cash to take advantage of opportunities can be powerful.  I'd argue housing presents such an opportunity right now.
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slugsworth

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Re: opportunity savings
« Reply #2 on: February 28, 2012, 11:06:20 AM »
That is an interesting perspective. 

I am curious about how many of the MM readers are entrepeneurs and if so, if you (assuming you are one of them) keep cash accounts ready for opportunities that might present themselves.   

AJ

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Re: opportunity savings
« Reply #3 on: February 28, 2012, 11:29:17 AM »
I think of my investment monies as "buckets". I start at the top and fill them up in order:

Bucket #1 is a $6k cash cushion in my checking account for spending, irregular expenses, and first-tier emergency savings.

Bucket #2 is an opportunity fund of $35k for good deals that come up, and/or a second-tier emergency fund. I keep this in mutual funds with a high percentage of bonds, but some stocks as well. I am currently filling this bucket now, having recently drained it to complete a refi to a 15-yr 2.75% on our primary mortgage. Edit: If we had enough equity in our homes, we would take out a HELOC to function as bucket #2.

Bucket #3 is my actual paper investment portfolio, which is riskier than bucket #2, very heavily weighted in stocks. Could be tapped in a really really bad emergency.

Bucket #4 is my 401(k) and IRA, also heavily weighted in stocks.
« Last Edit: February 28, 2012, 11:33:25 AM by AJ »