Looking for help with "excess" cash

[herrM]

HI, Looking for some advice, found this site finally decided to register and leave a question and message.

Married 45 years old. Two incomes about 170K before taxes. No debt - I paid off a mortgage 5 years ago. Value of Toronto home is $550-600K. Main expenses are car payments and raising two kids. I grew up poor and despise waste, I appreciate what I have earned and dont want to waste it. That being said i enjoy my daily starbucks coffee, lunch out 1/2 the time, my Ipad and vacations at 4+ star all-inclusive annually.

Fully maxed out on TFSA - Funding RESP and RSP - Last two years I saved around 50K in cash. From the trading account i made another $6K in dividend and bond payments.

"Problem" is I have a large portion of my money sitting in cash. I know making between 1-2% in short term accounts i am actually losing money. I lost money in Tech bubble and in 2008 and I am still scared of equities.

Below are three tables. The first shows my Trading account where i have 15% in cash.

The second table shows all the other cash combined which now bring me to about 45% in cash most of it sitting in kids account, making 2% BTW.

The third table shows the main stocks/bonds. For the most part I am up I think there are 4 losers (tlm-FRO-arun-xch) 3 with minor losses (less than 5%) the other are positive some very POSITIVE.

- Where is safe place to put some cash that can return a half decent amount?
- how much should i keep in cash?
- If my spending patterns continue i will probably save another 50K a year for the next 4 years so I have a positive cash flow.


Trading Account
stock $119,179 42%
CASH $41,841 15%
BOND $121,761 43%
$282,781 100%


All Accounts
stock $119,179 27%
CASH $195,181 45%
BOND $121,761 28%
$436,121 100%


Main Holdings
BOND CLF $60,930
BOND CBO $20,430
Stock AAPL $20,250
BOND XSB $17,550
BOND XSB $14,625
Stock BRK.B $11,680
Stock WMB $10,109
Stock EMA $9,912
Stock LULU $9,332
Stock TRP $8,906
Stock XFN $8,508
Stock PMZ.UN $6,183
Stock XDV $6,168
Stock MBT $5,934
Stock XCH $5,145
Stock IMG $4,854
BOND XGB $4,406
Stock TLM $3,894
BOND XCV $3,820
Stock ARUN $3,780
Stock AGNC $2,808
Stock FRO $1,716

[the-royal-mail]

The tables are far too detailed for the question you are asking. Doesn't matter how your investments are chosen. Keep the question simple and straightfoward for the best responses.

As far as where to put the excess cash, my suggestion is to buy some GICs with that money. Think carefully about whether you want them to be cashable or not and how long you are willing to have that cash committed and inaccessible (in the case of non-cashable GICs). The downside is you will have to pay tax on your gains but since your reg accounts seem to be filled up I don't think there's much you can do about that.

[Sherlock]

my suggestion is to buy some GICs with that money.

Now why should he go and do something crazy like that?

[jamesbe]

Maybe I'm too conservative but a GIC ladder makes sense. No point right now buying anything under 3 years though as the rates are too low.

[Sampson]

You are in a very good position, and have plenty of options, however, I would suggest you pose a similar albeit re-phrashed question for yourself.

Ask yourself, What goals am I saving for?

It is one thing to have extra cash and to try and 'earn' the most from it, and it is another to have specific targets (e.g. early retirement date, retirement lifestyle, funding childrens' education, estate building, buying vacation property etc, insurance coverage (whether through 3rd party, or from your own savings)).

Once you establish those types of goals clearly, you should be able to make a decision as to how much risk you need to take with your money. Taking on more risk to achieve higher returns may give you more money at the end of the day, but this could be at the sake of stress worrying about fluctuations in equity markets.

Make the goals first, then select an appropriate investment strategy (including asset allocation etc.) to meet those objectives.

[kcowan]

I would take a serious look at Corporate Paper. Ask your bank manager. You purchase unsecured paper, say $50k for $48k and in 1 year (or a variety of terms, 90 days being the most common) you have a capital gain of $2k by getting $50k back. With your large amount of cash, you qualify for this type of investing, and it is worth the trouble. It is the corporate equivalent of the GIC and widely used by treasurers. The main advantage over GICs is the tax treatment.

[herrM]

You are in a very good position, and have plenty of options, however, I would suggest you pose a similar albeit re-phrashed question for yourself.

Ask yourself, What goals am I saving for?

It is one thing to have extra cash and to try and 'earn' the most from it, and it is another to have specific targets (e.g. early retirement date, retirement lifestyle, funding childrens' education, estate building, buying vacation property etc, insurance coverage (whether through 3rd party, or from your own savings)).

Once you establish those types of goals clearly, you should be able to make a decision as to how much risk you need to take with your money. Taking on more risk to achieve higher returns may give you more money at the end of the day, but this could be at the sake of stress worrying about fluctuations in equity markets.

Make the goals first, then select an appropriate investment strategy (including asset allocation etc.) to meet those objectives.

Thanks .... I guess my goal would be to have enough for children's education and when I retire in fifteen years have sufficient income to live comfortably. Not keen on risky investments , conversely hate sitting on cash that gets me nothing. There was a comment about corporate paper? Strips? Perhaps I will investigate that , better an extra percent point than those from gics .

Thnx for your help again I really appreciate all the comments from this website