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  • Pharisee BendolphPharisee Bendolph
    Participant
    Post count: 62

    Hello Sean/everyone, trying to gain an understanding about something I’ve casually heard about on the forum. Sean you have mentioned something about taking 401ks to cash etc. I say this statement in the blog:”I prepared my subscribers for this AHEAD of time, so they were in cash in their 401ks/IRAs and not getting hurt by this stock rout. So…what happens next?”
    What exactly does this mean? I have some money in my Roth IRA through work. Sounds like there is a way for me to be in cash with the Roth?

    AvatarBob Smith
    Participant
    Post count: 90

    My ROTH is 100% cash. Waiting to buy on the upcoming crash.

    Sean HymanSean Hyman
    Keymaster
    Post count: 3366

    Pharisee, when you sell something and don’t buy another stock with it, that idle cash should “sweep” automatically into a money market fund, which is like a supercharged savings account…earning a bit more interest. Check with your broker to ensure you do have a sweep money market account attached to your IRA.

    As far as when to get back in…I’d encourage you to view the monthly newsletter that talks about bear markets and their lengths, etc. https://logicalinvestor.net/members-only/monthly-members-downloads/the-logical-investor-newsletter-march-2020/

    And some suggested levels in this one: https://logicalinvestor.net/members-only/monthly-members-downloads/the-logical-investor-newsletter-february-2020/

    Sean HymanSean Hyman
    Keymaster
    Post count: 3366

    Pharisee, if your Roth is through your work, you may need to ask your retirement accounts administrator.

    Jerry BeersJerry Beers
    Participant
    Post count: 26

    An IRA is usually self-directed, so when you sell a stock from the IRA, it increases the cash balance and you just don’t use that to buy another position. A 401k usually only offers a handful of mutual funds, but one of them is usually a cash-based fund. Like my 401k has one called “Federated Hermes Us Treasury Cash Reserves Inst”. This is a fund that is as close to cash as you could have. Your Roth might be invested in mutual funds or stocks, but you can sell those or change the allocation to cash funds (I’m not recommending anything, just saying what you could do).

    Pharisee BendolphPharisee Bendolph
    Participant
    Post count: 62

    Thanks everyone, I will ask the administrator about this and read those articles. God bless.

    Sean HymanSean Hyman
    Keymaster
    Post count: 3366

    You’re welcome. I love how helpful the people are on this forum. It’s awesome!

    Pharisee BendolphPharisee Bendolph
    Participant
    Post count: 62

    I totally agree!

    FusionDudeFusionDude
    Participant
    Post count: 144

    The 401(k) from my old employer allowed me to put 70% of the assets into a Self Directed Brokerage Account (SBDA). That was step one, and the majority of my LI investing is with that account. The remaining assets I’ve moved into more stable funds (against the advice of the management company!). That was step 2.

    My new employer also requires that I choose from among a small bucket of funds; there is no SBDA option. In that case, I use the “stable value” fund, which is the closest to cash that I can get. That was step 3.

    In the two accounts where I’m limited in my investment options, account, I’m waiting for the broader market to drop, and will enter an S&P index fund at the designated entry points. There’s less control there, so I can’t do LI picks, but I can avoid the loss that those invested in the broader market will experience when the bubble pops. When Sean talks about getting into the S&P in IRAs, it’s this scenario that he is describing.

    Sean HymanSean Hyman
    Keymaster
    Post count: 3366

    Yep, that’s awesome they allowed some of it to be self-directed. There’s not a ton of 401k administrators that allow that. But it sure is nice when they do.

    Pharisee BendolphPharisee Bendolph
    Participant
    Post count: 62

    I understand now. There are multiple funds that I have an option to reallocate the funds to. One is an index account for the S&P.

    Pharisee BendolphPharisee Bendolph
    Participant
    Post count: 62

    Just got off the phone again with the company. They have a money market account I can put the funds in. This would be the closet to my cash position correct? When S&P dips is when I listen and pay attention to LI. Then allocate my tranches accordingly. Does this sound correct?

    Sean HymanSean Hyman
    Keymaster
    Post count: 3366

    Yes, the money market account is what you want your unused/idle cash in because it earns some interest there while you’re waiting.

    The 2nd link I sent you earlier already has suggested reinvestment levels for the S&P 500.

    Pharisee BendolphPharisee Bendolph
    Participant
    Post count: 62

    Perfect! I’m on it! Thanks again!

    Sean HymanSean Hyman
    Keymaster
    Post count: 3366

    Cool. You’re welcome.

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