Whât % óf your net worth is in cash?

[commuter]

About 11%

[Gardening Grandma]

Apr 21, 2011 17:45:23 GMT -5 runewell said:

Unless you are invested at all times, using an allocation model suitable for you, you may not be in the market at the right time.

I don't get this: what does your asset allocation have to do with being in the market at the right time?

This is a really important issue and probably deserves its own thread. I'm pretty much a novice here and am hoping someone better informed than me will tackle this question....

[runewell]

The asset allocation really has nothing to with the timing of market movements. It's not rocket science that if you miss the top ten up days each year your long-tern gain will be siginificantly lower. But you could also argue the converse about the ten worst down days each year. If only I could have been OUT of the market then, I would have done much better.

Asset allocation says, have a diversified mix of everything according to your own risk tolerance. One concern is, if you buy a fund that had recently outperformed the market, are you merely buying expensive stocks whose values have been bid up? A fully diversified portfolio resigns itself from trying to outperform but simultaneously prevents underperforming as well.

[Deleted]

"This is a really important issue and probably deserves its own thread. I'm pretty much a novice here and am hoping someone better informed than me will tackle this question.... "

Go ahead and post it. Staying "balanced" (well at least financially ) is one of the reasons we made the move into bonds last month. You can read how I was beat up over in the Start Investing thread called "Need help with asset allocation"

The thing is you don't know when the highs and lows are going to hit the market. Or why the market over reacts to certain events. This one reason why dollar cost averaging into index funds works so well for most people.

[Gardening Grandma]

I read that thread, bonapp. i thought what you were doing made sense. I've only recently started trying to learn more about bonds in recent months.... I've become somewhat concerned to discover that two of our largest holdings in balanced funds have the bond portion in the lowest grade bonds.....The yield is nice, but I'm concerned that it's overly risky for us....

[gsbrq]

Maybe around 5% cash...a small emergency fund and the cushion in my checking account. Although that percentage would go up a bit if I included the cash holdings in the various mutual funds I own.

I have no plans to increase my cash savings, so I expect to see that percentage decrease as I continue to buy bonds & equities funds.

Personally, I don't include my house in my net worth calcs; I know I could sell it for more than I owe, but houses take time to convert to cash, and real estate values are too uncertain--I'd rather stick with what I can count.

[Deleted]

"two of our largest holdings in balanced funds have the bond portion in the lowest grade bonds.....The yield is nice, but I'm concerned that it's overly risky for us...."

Do you know what the % is? Of the 300k we invested 30k is in a "high yield" mutual fund aka "junk bonds". 10% isn't too high of an investment. We are also in Vanguard's total bond and Pimco's total return which also own some "junk bonds". "Junk" is a little extreme. These funds are holding "B" grade securities (vs Aa or Aaa) so while the risk is greater we're not talking about one company on the brink of default.

If you're concerned go over to Morningstar or review your prospectuses again and look at what % of the fund is invested in "junk" bonds. Given that so much of your NW is in your pensions (aka annuities) I suspect that you're not over invested. But make a project of researching each of your funds so you understand what and why you have what you do. Part of my quarterly update will be to update our fund holdings in our "retirement" column.

[Gardening Grandma]

"Do you know what the % is? Of the 300k we invested 30k is in a "high yield" mutual fund aka "junk bonds". 10% isn't too high of an investment. We are also in Vanguard's total bond and Pimco's total return which also own some "junk bonds". "Junk" is a little extreme. These funds are holding "B" grade securities (vs Aa or Aaa) so while the risk is greater we're not talking about one company on the brink of default."

yes, I ran it through M*'s portfolio x-ray. One fund ( Income Fund of America - IFAFX) comprises 18% of our portfolio. The other, Franklin Templeton Fund-FRIAX is nearly 19%. so 37% of our portfolio is in these two funds. M* rates IFAFX as "average" in both risk and return, but rates FRIAX as " high" on risk and " above average" on return. Both funds are "balanced"; they are about 50% bonds, but FRIAX also has over 10% in " other" (whatever that is). The prospectus says that they may also use derivatives and talked about the use of options. I'm thinking we should rebalance so that FRIAX is no more than 10%. I've already decided to stop reinvesting the dividends.....