Author Topic: Significantly Increased Our Cash AA  (Read 835 times)

Body Surfer

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Significantly Increased Our Cash AA
« on: April 23, 2020, 09:08:20 AM »
Hello. We are nearing retirement and decided the current market upheaval is too risky concerning our long term plans. We may decide to move to a more expensive area for retirement and therefore need a higher cash allotment to ensure the execution of our plans.

We are just now at AA 7/93. We were at AA 50/50 very recently (late March). When we feel the market has stabilized we will go back to a minimum of an AA of 30/70.

Have any of you increased your cash position? What is your new AA? Are you close to retirement?

Dicey

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Re: Significantly Increased Our Cash AA
« Reply #1 on: April 24, 2020, 07:21:29 AM »
I'm a bit confused by your numbers. 7/93 to 50/50 is a huge shift. Wnen and how did you do that? And typically AA is represented with your ratio of stocks/bonds/cash. You're only using two numbers, so I'm not sure what they mean. As for stocking up on cash, you might try this thread:

https://forum.mrmoneymustache.com/share-your-badassity/in-praise-of-big-fat-emergency-funds/

Try this one for post-FIRE asset allocation:

https://forum.mrmoneymustache.com/post-fire/post-retired-getting-older-and-more-conservative/

Much Fishing to Do

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Re: Significantly Increased Our Cash AA
« Reply #2 on: April 24, 2020, 08:18:12 AM »

We are just now at AA 7/93. We were at AA 50/50 very recently (late March). When we feel the market has stabilized we will go back to a minimum of an AA of 30/70.


Not sure if your ratio is equities/cash or equities/bonds given the discussion about cash, but either way this sure sounds like you have sold a huge amount at a scary low, and are planning to buy back high (as I find it hard to believe anyone will "feel" the market has stabilized when its below the late March lows), which doesn't sound like a very good plan. 

For anyone approaching/at FIRE that is vast majority equities, moving a small amount to cash (or bonds) seems fine to me (you're just locking in losses of a small percent of your portfolio to have something stable to spend over the next few years).  I've kinda done this in a way as instead of investing my (significant) annual bonus I have kept it as cash in case it comes in handy over the next few years.  But moving investment monies you probably wont need for decades, including almost all of your equities, like you did only seems fine to me if you've decided you can survive off of that new AA till death (why stomach the market moves if you don't have to), but again all I see here is basically a plan to sell low and buy high.

GuitarStv

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Re: Significantly Increased Our Cash AA
« Reply #3 on: April 24, 2020, 08:28:31 AM »
Changing your asset allocation because of temporary market changes is market timing, pure and simple.  Long term, time in the market is proven to work better than chasing highs/lows like you're doing.

Body Surfer

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Re: Significantly Increased Our Cash AA
« Reply #4 on: April 24, 2020, 01:13:57 PM »
We will be moving to a more expensive home not long after retirement and did not want that $ disappearing in a prolonged market downturn. Truth is I doubt we will be more than 15-20% in equities for a long time. We are very happy right now having 94% of our $ in cash. We feel secure. We have no idea how long the market will be down. I realize the fed has propped up the market but fundamentals are poor currently.

We are age 59 and retiring in May. If we were say in our 30's our strategy would be much different.