Author Topic: What would you do about my investing vs spending?  (Read 7306 times)

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What would you do about my investing vs spending?
« on: July 17, 2015, 05:38:37 AM »
What would you do if you were in my shoes, as follows?

Your passive income is 3 times your basic living expenses, which means you have an after-tax "disposable income" rate of 66%.  For whatever reasons, that disposable income -- which comes from stock dividends -- keeps accruing quite a bit faster than you spend it. What would you do with that accruing money?

If you let it sit in a bank account as cash indefinitely waiting to be spent, you're "losing" the extra dividends the money could make if you invested it.  But if you invest the cash, given your present spending mode, the extra generated dividends will simply get added to the accruing money.  And it takes you time and effort to do the research and monitoring required by the investing, which you do in individually selected dividend paying stocks.

Do you let the cash pile up as cash?  Or do you take the time and effort to invest it?

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« Reply #1 on: July 17, 2015, 05:46:36 AM »
Quote
And it takes you time and effort to do the research and monitoring required by the investing, which you do in individually selected dividend paying stocks.

surely you are doing this already?  Just reinvest the surplus in your existing positions.

or take the no-effort approach and buy index ETF's

:

Quote
Do you let the cash pile up as cash?
absolutely not, you will be throwing money away with a very low rate of return.

:

do you have dependents?  give them some money? (beware gift taxes)

Zamboni

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Re: What would you do about my investing vs spending?
« Reply #2 on: July 17, 2015, 06:36:24 AM »
Not in cash!

If I was sure this income stream will continue indefinitely, I'd invest half and give half to charity. Then I'd starting making plans for my estate upon my death. Either family, charity, or some combination of both are going to win big some day it sounds like.

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Re: What would you do about my investing vs spending?
« Reply #3 on: July 17, 2015, 07:28:35 AM »
As TIMU said, there is no time and effort required to invest since index funds exist. Even if charity is your end goal, you should still utilize investments of some sort to make that charitable giving last into the foreseeable future.

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Re: What would you do about my investing vs spending?
« Reply #4 on: July 17, 2015, 07:57:19 AM »
Donate it to a good charity.

Kitsunegari

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Re: What would you do about my investing vs spending?
« Reply #5 on: July 17, 2015, 08:29:45 AM »
Invest half of it, treat yo'self with the rest. Is there really no trip you want to take, no little luxury you want to concede to yourself or your loved ones?

K-ice

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Re: What would you do about my investing vs spending?
« Reply #6 on: July 17, 2015, 08:43:19 AM »
Congrats! This is a great problem to have.

Does your asset allocation need rebalancing?

Sounds like you don't want to worry about this often.

So once, or twice, a year change your DRIP (dividend re-invest).

For example, take your best over balanced stocks (1/3) and turn off the Drip and spend the cash.

For the other 2/3 keep the drip. They should reinvest and become larger. This is an automatic no brainier, no fee, way to rebalance.

The 1/3 higher performing stocks should be kind of stagnant over that time as you are not reinvesting in them.


Murse

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Re: What would you do about my investing vs spending?
« Reply #7 on: July 17, 2015, 08:45:10 AM »
If I remember correctly I read your blog and you have 4 holdings that provide you dividend income. If it were me I would diversify. Keep your 4 holdings because that is working for you and that is what you are comfortable with, but begin to diversify with an index fund just in case.

johnny847

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Re: What would you do about my investing vs spending?
« Reply #8 on: July 17, 2015, 09:13:58 AM »
If you have kids, keep investing the excess. any mutual funds, ETFs, and stocks (and I believe other financial assets that have some basis) will receive a step in basis upon your death. That could be some serious capital gains that are never taxed.

If you don't have kids, donate to charity. You should balance donating now, so you can help now, vs donating later, when your assets will be worth more.

arebelspy

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Re: What would you do about my investing vs spending?
« Reply #9 on: July 17, 2015, 09:43:03 AM »
Do you let the cash pile up as cash?  Or do you take the time and effort to invest it?



There's a million other options.  I like many of the above ideas.  Reinvest the dividends.  Invest in something that doesn't take time/effort (such as index funds).  Donate it to charity.  Etc.

You have to align your spending with your values.  How do you want to "spend" that money?  We can't answer that for you.

(Also insert #humblebrag picture here, too lazy to find one, but had logical fallacies on hand. ;) )
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Retired To Win

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Re: What would you do about my investing vs spending?
« Reply #10 on: July 17, 2015, 10:49:27 AM »
If I remember correctly I read your blog and you have 4 holdings that provide you dividend income. If it were me I would diversify. Keep your 4 holdings because that is working for you and that is what you are comfortable with, but begin to diversify with an index fund just in case.

Actually, my entire portfolio consists of 27 dividend-paying stocks, plus about 15% of the portfolio in cash (right now).  To avoid (further) confusion: that "investing cash" is separate from the disposable cash I presented in the thread's original post.

And I'm just not an index-investing kind of guy.

K-ice

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Re: What would you do about my investing vs spending?
« Reply #11 on: July 17, 2015, 11:17:02 AM »
Nice work!

With 27 stocks I think the ~1/3 cash dividends 2/3 Drip would work well.

You could even plan for about 40%-50% cash and have a little more fun money or investment cash for a new stock you want to try.  But it looks like you already have an investment cash stash :)


MDM

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Re: What would you do about my investing vs spending?
« Reply #12 on: July 17, 2015, 11:21:40 AM »
What would you do if you were in my shoes, as follows?

...it takes you time and effort to do the research and monitoring required by the investing, which you do in individually selected dividend paying stocks.
And I'm just not an index-investing kind of guy.

Surely you're not too old a dog to learn the new trick of index investing, which would solve your "don't want it in cash but don't want to spend time researching" conundrum.

Retired To Win

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Re: What would you do about my investing vs spending?
« Reply #13 on: July 17, 2015, 01:12:01 PM »
Surely you're not too old a dog to learn the new trick of index investing, which would solve your "don't want it in cash but don't want to spend time researching" conundrum.

Ahh, but I'm not there yet.  I haven't decided that I don't want it in cash.  I started this thread to gather input to help me decide.  (Lots of useful feedback, so far.)

Jeremy E.

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Re: What would you do about my investing vs spending?
« Reply #14 on: July 17, 2015, 01:28:28 PM »
Reinvest Dividends into Total Stock Market Index Fund, when you feel like doing research, sell it and buy dividend stocks(beware of capital gains).
You could also invest in Businesses, maybe you want to start a small restaurant, hire a good General Manager, and then you can be involved only as much as you want.
Don't care for restaurants? Open a small bar, open a small rafting tour guide company, surf instructor, open up a car wash and use it to smuggle in money from a meth business, whatever floats your boat.
If you don't want to spend it or give it to friends or family yet, don't donate it just quite yet. Let it use the force of compound interest for the rest of your life, and then give a small amount to certain friends and family and donate a TON to multiple charities of your choosing.

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Re: What would you do about my investing vs spending?
« Reply #15 on: July 17, 2015, 07:31:02 PM »
... You could also invest in Businesses, maybe you want to start a small restaurant, hire a good General Manager, and then you can be involved only as much as you want.

Don't care for restaurants? Open a small bar, open a small rafting tour guide company, surf instructor, open up a car wash and use it to smuggle in money from a meth business, whatever floats your boat...

Sarcasm aside, the income I referred to in my original post is passive income, and I want to keep it that way: passive.

Aside from that, this reply takes it for a given that I would want or should want to make more money.  To paraphrase the point I tried to make in that initial post, "... given my present spending mode, the extra generated [income] will simply get added to the accruing money."  And so the initial question is left unanswered: in my place, why would you?

MDM

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Re: What would you do about my investing vs spending?
« Reply #16 on: July 17, 2015, 07:40:58 PM »
And so the initial question is left unanswered: in my place, why would you?

People may choose to answer this question in their own ways, so one person's great idea could be anathema to another. 

One could also ask, "given it could take less time to invest the money than the time invested in posting to this thread, why wouldn't you?"

Jeremy E.

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Re: What would you do about my investing vs spending?
« Reply #17 on: July 17, 2015, 07:45:19 PM »
... You could also invest in Businesses, maybe you want to start a small restaurant, hire a good General Manager, and then you can be involved only as much as you want.

Don't care for restaurants? Open a small bar, open a small rafting tour guide company, surf instructor, open up a car wash and use it to smuggle in money from a meth business, whatever floats your boat...

Sarcasm aside, the income I referred to in my original post is passive income, and I want to keep it that way: passive.

Aside from that, this reply takes it for a given that I would want or should want to make more money.  To paraphrase the point I tried to make in that initial post, "... given my present spending mode, the extra generated [income] will simply get added to the accruing money."  And so the initial question is left unanswered: in my place, why would you?
Some would consider having to research dividends not so passive... maybe that's why you don't want to do it?
Index funds are closer to passive

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Re: What would you do about my investing vs spending?
« Reply #18 on: July 17, 2015, 07:46:27 PM »
If you have kids, keep investing the excess. any mutual funds, ETFs, and stocks (and I believe other financial assets that have some basis) will receive a step in basis upon your death. That could be some serious capital gains that are never taxed.

If you don't have kids, donate to charity. You should balance donating now, so you can help now, vs donating later, when your assets will be worth more.

We don't have kids.  Or any relatives we would care to see receive an unearned windfall.  If I go first, my wife will get my stash... and then she'll be deeper into her own investing/spending conundrum since her stash is considerably bigger than mine already.  And if she dies first, my conundrum will be that much huger.

So from this reply quoted above, that leaves the question of donating.  Well, not really the question of whether since I donate already.  It becomes a question of how much to donate now.  (Once I'm dead, I'm out of the picture so that's not what's going to drive my thinking about what I would like to do now.)  And, having thought about it, I am going to bump up my donating to 15% of my disposable income.  But that's going to be it for now.

And so the original post's core question remains open.

So let's keep working this.  You guys throwing out ideas and/or face punches and me digesting and analyzing.

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Re: What would you do about my investing vs spending?
« Reply #19 on: July 17, 2015, 07:57:18 PM »
And so the initial question is left unanswered: in my place, why would you?
... One could also ask, "given it could take less time to invest the money than the time invested in posting to this thread, why wouldn't you?"

Okay, here's the thing.  Since it's my thread and my question, for the feedback to be meaningful to me it is going to need to take my context into account.  If I wasn't clear enough in my original post, that's my bad.  Let's see if I can do better this time around.

The question is, then, whether I should just keep the accruing disposal income accruing as cash or whether I should take the effort to invest it in individual dividend-paying stocks -- which is what I do when I do investing.  (The debate about the advantages of index investing I already had on the Investing subForum and, if Dodge couldn't move my needle you know I'm a hopeless case where that particular topic is concerned.)

And so, to answer the reply quoted above, it most definitely would not take "less time to invest the money than the time invested in posting to this thread."

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Re: What would you do about my investing vs spending?
« Reply #20 on: July 17, 2015, 08:00:36 PM »
... the income I referred to in my original post is passive income, and I want to keep it that way: passive.
Some would consider having to research dividends not so passive... maybe that's why you don't want to do it?  Index funds are closer to passive.

Now, there's a good observation.  So I'm throwing it into my "thinking hopper."


MDM

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Re: What would you do about my investing vs spending?
« Reply #21 on: July 17, 2015, 08:40:51 PM »
This is somewhat reminiscent of mortgage payoff vs. investing discussions.  As with those, given that you understand the financial trade-offs (and it appears you do), then do what makes you happier.  Only you can tell that.

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Re: What would you do about my investing vs spending?
« Reply #22 on: July 17, 2015, 09:54:34 PM »
I honestly might keep it in cash.  Since you're already retired, and seem to have way more than you need in the market, why re-invest?  Keep it on hand, and if the market crashes and dividends are cut, you'll be on cruise control til the recession is over without touching your stash.

That or give it to charity. 

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Re: What would you do about my investing vs spending?
« Reply #23 on: July 17, 2015, 10:06:21 PM »
I honestly might keep it in cash.  Since you're already retired, and seem to have way more than you need in the market, why re-invest?  Keep it on hand, and if the market crashes and dividends are cut, you'll be on cruise control til the recession is over without touching your stash...

Another good insight.  Into the thinking hopper!

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Re: What would you do about my investing vs spending?
« Reply #24 on: July 18, 2015, 07:57:06 AM »
I'm going to make one more stab at the index fund, but not as an investing strategy, so hear me out, please. Your investing is something you do with carefully selected individual funds. That works for you. Now, it's working so well you have a bunch of cash sitting in a savings or checking account doing nothing.


Let me suggest that for you, an index fund is, or could be, not an "investment" but a "better savings account until I make up my mind/decide on some treat."


You don't need the cash cushion; you have that in your AA. This is surplus; let it sit more productively than in a bank account until you have a good use for it or until you decide to put it back into your investment strategy.

Murse

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Re: What would you do about my investing vs spending?
« Reply #25 on: July 18, 2015, 08:32:49 AM »
If I remember correctly I read your blog and you have 4 holdings that provide you dividend income. If it were me I would diversify. Keep your 4 holdings because that is working for you and that is what you are comfortable with, but begin to diversify with an index fund just in case.

Actually, my entire portfolio consists of 27 dividend-paying stocks, plus about 15% of the portfolio in cash (right now).  To avoid (further) confusion: that "investing cash" is separate from the disposable cash I presented in the thread's original post.

And I'm just not an index-investing kind of guy.
Sorry for the confusion, I don't know where I got that idea then.

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Re: What would you do about my investing vs spending?
« Reply #26 on: July 19, 2015, 08:28:04 AM »
After thinking and analyzing during one of my nice, long "clipboard" hikes yesterday, I've decided that aschmidt's advice below is the way for me to go.
I honestly might keep it in cash.  Since you're already retired, and seem to have way more than you need in the market, why re-invest?  Keep it on hand, and if the market crashes and dividends are cut, you'll be on cruise control til the recession is over without touching your stash.

That [and/]or give [all or some] to charity.

Except I'm actually taking it a little bit further, based on Jeremy E's observation in Reply # 17 that:
Quote
"Some would consider having to research dividends not so passive... maybe that's why you don't want to do it?"


I've come to realize that my resistance against continuing to invest generated dividends and realized gains into yet more dividend-generating stock positions comes from just about equal parts (1) feelings of resentment at the work involved and (2) feelings of pointlessness at the generation of additional cash that is most likely going to remain unspent.

So, if I'm not reasonably expecting to spend the money, I would rather have the time back.  And that means I am (1) keeping my surplus disposable income as cash in a "high yield" savings account, AND (2) suspending further new investing, and recategorizing presently designated investing cash as additional surplus disposable cash.

And this is where all that leaves me.

(1) My portfolio will now be in "stasis" as will my now more passive income.  (Monitoring of present positions will continue.)

(2) I'll still have 2/3 of that passive income available as disposable cash in a dedicated checking account (the Discretionary Fund).

(3) I'll either spend or not spend that disposable cash.

(4) On a monthly basis, any unspent disposable cash in the Discretionary Fund -- except for donations equal to 10% of my total income -- will be moved over to a high-yield dedicated savings account (the Discretionary Reserve) to make room for new surplus money coming into the checking account.

(5) That Discretionary Reserve savings account will serve as a liquid backstop to protect against any possible catastrophic drops in dividend income and will still be available for either "extra" discretionary spending or reinstated future new dividend stock investing if it should be warranted or desired for any reason, including a change of mind. (!)

(6)  I will gain additional open time now freed from the demands of researching and analyzing potential new portfolio positions.

Now "all" I have to do is figure out what to do with that newly found additional open time: http://forum.mrmoneymustache.com/journals/my-retirement-compass-reset-journal/msg710749/#msg710749

Another Reader

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Re: What would you do about my investing vs spending?
« Reply #27 on: July 19, 2015, 08:53:38 AM »
In your shoes, I would sit down with the spouse and work on our "bucket" lists.  For me that would be a lot of experiences I either could not afford or did not have the time for when I was younger and working.  For example, you are a history buff.  What about a trip to Europe to see the important battle sites of World War II?  Or a trip focused on Italy to view the architectural and engineering achievements of the Roman Empire?  What are your wife's interests?  Would she enjoy a beach tour of Southeast Asia?  What about a volcano exploration trip to Hawaii?  Do either of you want to see China as it modernizes?  What parts of the USA haven't you seen that would interest you or her?

Does your house need any work to make it more comfortable?  I know that I have been thinking about improvements that will make this house more friendly to aging in place.  I would make those now, not later.

What about nieces and nephews and other family members?  Can you give financial assistance to the ones that need it and have demonstrated a work ethic and values that align with yours?  Tax-free gifts to pay off student loans or help a newly employed younger family member buy a suitable used car for transportation are ideas I would consider.

Your wife is interested in animals, including companion animals.  Are there organizations in your area that would make efficient use of monetary donations?  With your background, could you volunteer to help one manage its finances?

Those are just a few ideas.  If you allow yourself to think freely about what you want to accomplish and build your bucket list on your current interests, my guess is you will find plenty of ideas to occupy your time and spend that excess cash.

frugally

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Re: What would you do about my investing vs spending?
« Reply #28 on: July 19, 2015, 09:11:52 AM »
I know you said you're not particularly interested in spending any time making this money grow, but I'm going to throw this out here anyway:

One thing I intend on looking into when my passive income significantly overruns my expenses is to invest hyper-locally.  By that, I mean bootstrapping new businesses (with good ideas) that make a meaningful difference in the community.  For example, there is a guy in my city who created a sign business with an emphasis in language localization (there are three oft-used languages where I live).  He needed probably $10-15k to get started, and had to wait a couple years longer than he otherwise would have if he got some seed money.  I feel like investing in my immediate community is going to bring me more happiness than donating to causes where I have no direct influence.

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Re: What would you do about my investing vs spending?
« Reply #29 on: July 19, 2015, 09:22:10 AM »
+1 to frugally.  You have a business background, so angel investing is something to consider.  Also volunteering to help small businesses through SCORE or a local group is something to consider.

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Re: What would you do about my investing vs spending?
« Reply #30 on: July 19, 2015, 01:18:04 PM »
Every 6 months (January and July) I take my excess cash and buy a 10 year TIPS bond from Treasury direct. That puts the problem off for 10 years, and incidentally guarantees me an inflation protected income for the next 10 years.

When the 10 years is up I add whatever excess I have, or take out whatever I need, and buy a new bond.

If I were younger I'd also do 30 year bonds.

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Re: What would you do about my investing vs spending?
« Reply #31 on: July 23, 2015, 06:12:45 PM »
In your shoes, I would sit down with the spouse and work on our "bucket" lists.  For me that would be a lot of experiences I either could not afford or did not have the time for when I was younger and working... Does your house need any work to make it more comfortable?...  I would make those now, not later... Are there organizations in your area that would make efficient use of monetary donations?  With your background, could you volunteer to help one manage its finances?

Those are just a few ideas.  If you allow yourself to think freely about what you want to accomplish and build your bucket list on your current interests, my guess is you will find plenty of ideas to occupy your time and spend that excess cash.

These are all excellent thought starters.

We already have in motion the house improvement (installing hot tub is present project) and the donating of money and time to nonprofits (both locally and otherwise).  But what really intrigues me about Another Reader's feedback is the bucket list idea.  Particularly since, with my active investing suspended, I have even more free time to go a-bucketing.

My thinking cap is on.  Let's see what develops.