Weekend Reading – Five years in cash?
Hey Folks,
Welcome to a new Weekend Reading edition, with a reminder that despite market calamity our annual dividend income remains on the rise reaching a new, projected all-time-high.
Weekend Reading – Five years in cash?
Inspiration for this headline arrived via Rob Carrick’s article (subscription).
Rob didn’t hold back when he mentioned:
“First, check your timelines. If you need your money within the next five years, get it out of the stock market immediately and put it in a bank savings account or similar products offered to investors. Only by committing for at least five years, and much preferably 10, can you be confident that stock market ups and downs will net out in decent returns.”
He’s probably not wrong, cash or similar products.
I mean, given the current calamity, without any end in sight along with more doom-and-gloom on the horizon in the coming weeks with more tariff announcements I also think it would be prudent to maintain a decent amount of safety outside stocks.
While we work on more, in my case though, I’m going with at least 1-years’ worth of spending in cash/cash equivalents but not quite five years worth.
I’ll share more news / details when I update this post below in the coming weeks, but suffice to say we’ve been saving up cash/cash equivalents for some time now – building a bit more brick-by-brick since 2023.
I’m not sure we will “get it (money) out of the stock market immediately”, in fact, I might even buy some stocks or ETFs in 2025 if I can afford to do so but with both of our workplace transition plans now approved and in place, investing for retirement is no longer a priority. Sounds very odd to write that…
In recent weeks, I’ve also read many conflicting articles on asset allocation including geographical diversification.
Recently I read an article that mentioned:
“A more reasonable approach is to keep a toehold in U.S. stocks, but tilt your portfolio in other directions. Canadian dividend stocks have growing appeal. So do Canadian government bonds, guaranteed investment certificates and gold. Investors should also consider the case for more radical diversification. European stocks have been surging and there is a strong case that they have more room to run after the German government signalled it will ease up on its notorious debt brake and spend more freely on defence and infrastructure.”
Yet less than a year ago, the same author had the headline and content related to:
Source: G&M.
I dunno folks, wild times. Definitely a trigger for portfolio review and assessment. No question. But it doesn’t mean you have to change much, if anything.
Personal finance and your risk tolerance is very personal.
I’m personally not going forward with any radical diversification as some headlines suggest. I haven’t changed many holdings since COVID began 5-years ago now although I have sold off a few individual stocks in our portfolio to simply things. Those decisions have been smart to date since the portfolio value has grown considerably since then while simplified as well for asset decumulation – less moving parts.
Only in hindsight do I know if I made the best decisions…we’ll see how these recent ones turn out!
Despite current market conditions, I will:
- Keep my low-cost ETF QQQ for a small tech-kicker if/when tech stocks come back into favour. Why sell when this ETF is down in price? QQQ is a low % of my portfolio value anyhow (
- Keep my low-cost ETF for ex-Canada diversification that dominates our RRSPs in particular: XAW. That ETF includes international stocks beyond the U.S. already – thank goodness.
- Keep my basket of Canadian stocks for income and growth, and buy more when I can afford to do so.
- Keep growing my cash/cash wedge balance for near-term spending.
That’s essentially it.
How are you doing out there? Keeping more cash? Buying more stocks? Are you pursuing some radical diversification?
More Weekend Reading – Beyond five years in cash
Congrats to my friend Dividend Daddy, @DividendDaddy1, reaching a well-earned retirement:
Source: https://x.com/DividendDaddy1/status/1895826626061222016
An excellent reminder about our recent market volatility. What you sign up for when investing in stocks since there are costs in trying to time the market with reference to Visual Capitalist:
Reader question of the week (adapted slightly for the site):
Mark, I read your 60/40 post with interest. I have considered for a while now moving all my registered, RRSP investments into VBAL and have recently done so for a better mix of growth and safety for retirement income planning. My plan is to sell off VBAL units every year or so, fund my cash wedge, and live off that for RRSP withdrawals. Thoughts? Seems aligned with your data in that post and seems simple enough to do too.
Thanks for your question!
For reference, here is that post:
And while I cannot provide financial advice directly to you, yes, this is what 60/40 or related stock/fixed income portfolios are designed for: you sell off ETF units, every year or so, and live off that.
When it comes to simplicity – leveraged from Christine Benz recently at Morningstar, on X/Twitter:
“I don’t really get when people hunt around for the best cash yields, assemble CD ladders, etc. My bias is to buy a federal money market fund from a very low-cost provider that pays you the lion’s share of prevailing yields. Cash holdings should be simple and low-stress.”
Source: https://x.com/christine_benz/status/1889828274429370676
Good stuff. 🙂
Have a great weekend!
Mark
Mark
My name is Mark Seed – the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I’m looking to start semi-retirement soon, sooner than most. Find out what I did and how I realized Financial Independence to tailor your own path. Join the newsletter read by thousands. Always free.
