Announcement

Collapse
No announcement yet.

Late stage meltup ? Opinions sought on allocating cash

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Late stage meltup ? Opinions sought on allocating cash

    I've been avoiding thinking about it for a while but I can't avoid it any longer.

    It's time to decide about whether to participate in a late stage equity meltup (if it occurs) or whether I can mentally sit it out. Particularly, I have about 5% of assets accumulating or about 500k in cash (short term MM funds - debt) and I am wondering whether to put that into an equity allocation or not.

    My asset situation is:

    House : 3m, no debt

    Other property assets : 7.5m-10m, 500k debt

    Household income : 900k/year

    retirement accounts : 1m : Short term MM/cash allocation

    My retirement account is in cash since 2014 when I had this crazy, hare brained idea that the world was coming to an end with the Chinese economy hiccup. Anyway, I did find workarounds to this by buying property in my non retirement holdings with debt to offset the cash balance in my retirement account. But once that mistake was made, I found it very hard to reverse the cash allocation in the retirement account.

    With things getting to a later stage in the cycle, I sold all the non-core property holdings recently and paid off debt.

    Now I am wondering whether I can sit and watch an equity meltup or whether I should bite the bullet and just allocate it into the 500k-1m in a 30-70 type allocation.

    The January 2018 Grantham article keeps coming into my mind (to paraphrase): 'Prudent preparation for a downturn will take a psychological toll. Know how much pain you can stand because the average person is going to lose patience. “The market, instead of going down, not only goes up, but goes up at a faster rate than normal,” . “You’re going to feel dreadful.”'

    https://www.gmo.com/docs/default-source/research-and-commentary/strategies/asset-allocation/viewpoints---bracing-yourself-for-a-possible-near-term-melt-up.pdf

    Unfortunately, I think may have made an error and gone to cash to wait for a downturn in this portion of my portfolio and rationalized it as risk control.

    Any thoughts ?

     

     

  • #2
    shouldn't you be giving us advice?

     

    Comment


    • #3
      On one hand it pains me to think of holding a million dollars in cash since 2014 - the S&P has gained 50% since 1/1/2014.

      On the other hand you have ~10 million in investment properties and make 900k/year.

      You could probably invest that million in bubble gum futures and still be financially independent.

      You can afford to take more risk, but you should do whatever let’s you sleep at night.

      Comment


      • #4
        You've proven you're lousy at market timing, so maybe you should quit doing that.

        Comment


        • #5
          just allocate it into the 500k-1m in a 30-70 type allocation.

          If by "30-70" you mean 30% stock and 70% bonds, then I like that strategy.  Using a low risk AA is a prudent baby step back into equities.

          Comment


          • #6
             




            shouldn’t you be giving us advice?

             
            Click to expand...


            Clearly definitely not. We are our own worst enemy....

            Comment


            • #7




               




              shouldn’t you be giving us advice?

               
              Click to expand…


              Clearly definitely not. We are our own worst enemy….
              Click to expand...


              Well 13 million net worth in his forties! seems pretty good to me.   It’s definitely more than my f u number and he’s still making 900k per year.

              We all have missed opportunities but no chance in my life I get to thirteen million without some kind of lottery.

              Unless he was born with silver spoon and started with net worth 20 million.   Then I take it all back.  

              Comment


              • #8
                Either lump sum it in or dollar cost average it in over the next 12 months.

                 

                I don't know when you plan on retiring but hopefully your expenses are reasonable. A $900k income over the next few years can certainly help smooth out any market dips.

                Comment


                • #9
                  With your NW, what is the goal?

                  Chill? If so doesn't matter. Keep in cash, bonds, donate it, eat it

                  Continue investing then you should invest the cash and not sit on 1 million (allocate it the way you said it).

                  Comment


                  • #10
                    How much of the 900k/yr household income is investment property income vs working?

                    Comment


                    • #11




                       

                      My retirement account is in cash since 2014 when I had this crazy, hare brained idea that the world was coming to an end with the Chinese economy hiccup. Anyway, I did find workarounds to this by buying property in my non retirement holdings with debt to offset the cash balance in my retirement account. But once that mistake was made, I found it very hard to reverse the cash allocation in the retirement account.

                       

                       

                       
                      Click to expand...


                      That was expensive. The good news is you could afford it.

                      I bought stocks and bonds this month. I was a little heavy on real estate. I have no idea what the future holds so I use a static asset allocation. By accepting the fact I'm "dumb," I often become the "smartest in the room."

                       
                      Helping those who wear the white coat get a fair shake on Wall Street since 2011

                      Comment


                      • #12
                        The melt up has been going on for about a decade now.

                        If you look at the big picture it's been going on for over 70 years.

                        If you look at the bigger picture it's been going on for over 100 years.

                        Feel free to jump in whenever you want.  I do promise you this: As soon as you invest that million, the market will correct.  Just accept that fact and proceed.

                        Comment


                        • #13




                          You’ve proven you’re lousy at market timing, so maybe you should quit doing that.
                          Click to expand...


                          How do you do that?  Deciding to drop the cash back into the market is timing too.   :mrgreen:

                          Comment


                          • #14
                            I think it's a really good time to sit down and look at a few things:

                            1) What are your expenses now

                            2) What are your anticipated expenses in retirement

                            3) What are your retirement goals (i.e. age, lifestyle, leaving xyz to kids, etc)

                             

                            $10 million in assets is 300k/year at an SWR of 3% (i'm not sure what asset allocation the SWR assumes). If that's enough for you then you've already won the game, just pick a low risk asset allocation while you continue to work. You may not be maximizing your potential gains but you're minimizing your losses which seems to be more important to you at this point in life and I would agree that is fine if you continue to work. You are no longer in the accumulation phase of your life, you are presently in the bonus round.

                             

                            Comment


                            • #15
                              When you have been successful at building wealth, one important part of the plan going forward is to not lose too much.  Some say if you have won the game, stop playing.  Having a big chunk of cash can be part of that safety plan, so if I were in your shoes I wouldn't sweat it too much.

                              I have built up a substantial net worth over the course of my career, but I am still playing the game to an extent.  We live in a VHCOL area.  If our net worth continues to go up over the next few years, we will be able to afford to continue to live in this VHCOL area forever, paying crazy amounts of federal and state income taxes (46% marginal and around 40% effective).  If the net worth takes a dive, then we can always move to a LCOL area and still be fine.  I keep 7 figures in cash equivalents, so that is safe money that is off the table.  And our investment real estate income feels similar to a fixed income tax free bond, relatively safe compared to stocks.  But then we also have large sums of money in the market, and I continue to invest in the stock market every month on autopilot, despite the extreme valuation.  However, these days when extra cash comes in, I am allocating that to paying off the last of the debt on our real estate investments, even though our remaining loans are only about 14% of the market value of the real estate.

                              Comment

                              Working...
                              X