# Sitting on the sidelines with cash



## sherwooddavid (May 5, 2009)

I sold all my investments about a week ago just before they started to drop(great timing) and now have approximately $500K in cash in my account. I plan on re-investing soon but with the markets still dropping I'm wondering if I should just stay in cash until the end of the year or jump back in now ?


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## cainvest (May 1, 2013)

When it comes to timing the market, nobody knows ... might as well consult your magic 8 ball.


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## andrewf (Mar 1, 2010)

Why did you sell all your investments? Purely market-timing?


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## 1980z28 (Mar 4, 2010)

I sold on the 10 th 1000 shares of ry for 77.50 and today purchase 400 at 75.47

It is ok to hold cash,as long as you have some kind of plan

There is a lot of sales out there now,great time to shop or index

I wish I had 500k ,I would spend 1/2 on equities,the rest wait and see

Good luck


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## sherwooddavid (May 5, 2009)

It was on my Financial advisor's advice. He suggested that I sell and go into a more conservative or balanced mutual fund. It just happened that the markets started to drop the day after I sold and I am now thinking about the timing of re-investing.


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## sherwooddavid (May 5, 2009)

Thanks for the advice 1980z28.


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## blin10 (Jun 27, 2011)

if you had 500k invested in dividend paying stocks yielding around 4-5%, it's costing you approx. $1800 every month to sit on sidelines... you might get lucky few times, but in the long term you will loose if you keep trying to time it....


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## thepitchedlink (Feb 17, 2014)

not to mention that by selling 500k worth of investments, I'm guessing you will have triggered a bunch of capital gains tax that will have to be paid....


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## jerryhung (Mar 28, 2011)

Wow, PERFECT timing for sure

but yeah, it makes buying tricky now in this downfall... when do you go in, since nobody knows where the bottom is...


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## Sampson (Apr 3, 2009)

sherwooddavid said:


> I sold all my investments about a week ago just before they started to drop(great timing) and now have approximately $500K in cash in my account. I plan on re-investing soon but with the markets still dropping I'm wondering if I should just stay in cash until the end of the year or jump back in now ?


Jump back in at the market low. That is the best advice you will be able to receive.


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## andrewf (Mar 1, 2010)

sherwooddavid said:


> It was on my Financial advisor's advice. He suggested that I sell and go into a more conservative or balanced mutual fund. It just happened that the markets started to drop the day after I sold and I am now thinking about the timing of re-investing.


Sounds like an awful advisor. He is probably just churning your funds to generate more commissions. Even if your portfolio was too aggressive, the answer is not to liquidate the lot and move to cash. You could sell a portion and invest in a fixed income fund.


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## andrewf (Mar 1, 2010)

Sampson said:


> Jump back in at the market low. That is the best advice you will be able to receive.


I can't tell if you're trying to make the point that OP will not receive good advice on this topic.


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## humble_pie (Jun 7, 2009)

2 good reasons why not to sell an entire portfolio are mentioned just upthread:

1) investor will forfeit all dividend income while sitting on the bench;

2) investor will face high capital gains tax.

another reason not to sell is that folks tend to dither & dally over getting back into the market. They might believe they've sold high & they might believe they're going to buy back low or at least lower, but what often happens is that they sell high & end up buying back higher.

it's better to stay in the game imho. Keep the stocks, just go play in another league. Sell calls. If truly bearish, buy puts.


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## Sampson (Apr 3, 2009)

andrewf said:


> I can't tell if you're trying to make the point that OP will not receive good advice on this topic.


I guess I was being cheeky.

It seems the OP is after a market timing strategy, so I`m not sure whom, even the financial adviser will give good advice. In fact, OP responded to 1980z28`s exactly of getting back in at lower cost, but there was not advice.

to the OP, what did you do back in 2008-09. If you timed the market well, use the same strategy. If you sold off like everyone else...


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## humble_pie (Jun 7, 2009)

Sampson said:


> [After selling high] jump back in at the market low. That is the best advice you will be able to receive.



i'd like to nominate this as the first post in what should be a brand new thread of blockbuster investor aphorisms, cmf style.


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## Sampson (Apr 3, 2009)

Maybe some useful advice would be: fire the advisor...


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## Sampson (Apr 3, 2009)

humble_pie said:


> i'd like to nominate this as the first post in what should be a brand new thread of blockbuster investor aphorisms, cmf style.


No doubt there would be plenty more to add...


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## humble_pie (Jun 7, 2009)

as shakespeare said in Henry the Sixth

_" The first thing we do, let's kill all the lawyers["/I]

we could just add advisors ..._


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## kcowan (Jul 1, 2010)

sherwooddavid said:


> It was on my Financial advisor's advice. He suggested that I sell and go into a more conservative or balanced mutual fund. It just happened that the markets started to drop the day after I sold and I am now thinking about the timing of re-investing.


I think you should be talking to your FA. You took his advice already. Now ask him how you are going to make money!

I would also ask him how he is going to make money by your actions.)


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## RBull (Jan 20, 2013)

andrewf said:


> Sounds like an awful advisor. He is probably just churning your funds to generate more commissions. Even if your portfolio was too aggressive, the answer is not to liquidate the lot and move to cash. You could sell a portion and invest in a fixed income fund.


Ditto. 

Perhaps the best advice is to find a good advisor. I wouldn't be talking to your old one any more.


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## Financialplannerdude (Apr 30, 2015)

I second what Andrew Hallam had to say

Why I love market corrections 

http://andrewhallam.com/2015/08/why-millions-of-americans-should-hope-for-a-stock-market-crash/


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## larry81 (Nov 22, 2010)

The problem with market timing is that you actually have to make two decisions, when to get out and ... when to get in !


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## humble_pie (Jun 7, 2009)

another gilt-edged aphorism, recently, from a cmffer who normally could be expected to know better:



> giving Mr. Market too much credit is a mistake


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## avrex (Nov 14, 2010)

sherwooddavid said:


> It was on my Financial advisor's advice. He suggested that I sell and go into a more conservative or balanced mutual fund.


The financial advisor hasn't given you any *good reason to sell* your current portfolio. Ask him why.

And now he wants you to *buy a mutual fund* (with a high-fee MER, I'd bet). :eek-new: 

Yep, it sure sounds like he'll  be raking in the commissions on this move.


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## lonewolf (Jun 12, 2012)

sherwooddavid said:


> I sold all my investments about a week ago just before they started to drop(great timing) and now have approximately $500K in cash in my account. I plan on re-investing soon but with the markets still dropping I'm wondering if I should just stay in cash until the end of the year or jump back in now ?


 Take the money & run, Congratulations on the excellent timing. Job well done


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## Afp (Mar 19, 2013)

larry81 said:


> The problem with market timing is that you actually have to make two decisions, when to get out and ... when to get in !


Absolutely agree. With investment, less is more. I enjoy reading your posts Larry and still going back to your thread "all-in on SU at 26" few years ago. That one was classic 👍

I know you have since switched all to index. My question for you is "do you keep some cash waiting for a big sale off or you stay invested 100% all the time?" If you keep cash, then how many % of your portfolio value?

Thanks.


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## My Own Advisor (Sep 24, 2012)

cainvest said:


> When it comes to timing the market, nobody knows ... might as well consult your magic 8 ball.


+1


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## agent99 (Sep 11, 2013)

Sampson said:


> Maybe some useful advice would be: fire the advisor...


Could be. But let's say he was earning 2% in dividends on the $500k. And market drops 6% over 12 months. (TSX Composite has dropped about 1000 points over past 12 months). He invests the $500k in a high interest savings account at say 1.5% (Canadian Tire Financial) or even at his broker for 0.8%. 12 months from now, who will have been right?

I am not selling my portfolio, but have weeded out some of the rubbish. Also have fixed income maturing that it is hard to find a home for. Have about $100k sitting idle. It's mostly in registered, so not easy to put in external HIS accounts. Probably put it in retractable preferreds or something that is bond-like.


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## larry81 (Nov 22, 2010)

Afp said:


> Absolutely agree. With investment, less is more. I enjoy reading your posts Larry and still going back to your thread "all-in on SU at 26" few years ago. That one was classic &#55357;&#56397;
> 
> I know you have since switched all to index. My question for you is "do you keep some cash waiting for a big sale off or you stay invested 100% all the time?" If you keep cash, then how many % of your portfolio value?
> 
> Thanks.


Hehe [email protected], i remember myself looking at the ticker each morning during our winter southern vacancy with my wife, stock picking is bad for your health i am telling you !

At this moment i am invested 100%, i am fortunate enough to have a steady flow of new capital coming in monthly and i keep purchasing according to my AA. I have literally about 170$ sitting idle on my TDDI accounts, leftover from my last purchases.

The only move i would make is liquidate my TFSA (filled with ZRE units) and purchase a speculative position (CHK, CENX, IMG, etc.) but bleh. My current YTD portfolio return is 8.27%, so far so good !


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## Financialplannerdude (Apr 30, 2015)

*How to Hedge Your Porftolio*

An interesting article in this month’s Money Saver (subscription required) by Andrew Hepburn, How to hedge your portfolio. He says there’re 4 ways

•	balanced portfolio
•	leveraged ETFs
•	short selling
•	buying puts tied to the the TSX. 

The first one is the most common, that last one would be true insurance against a market decline.


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## larry81 (Nov 22, 2010)

IMHO the best "hedge" is to simply pick an asset allocation in line with your real (not perceived) risk tolerance. Always interesting to see the "end of the world" posts pop when mr market drop 2-3%. Most of the peoples posting theses kind of threads should just lower their equities exposure and sleep well at night.


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## andrewf (Mar 1, 2010)

Agreed. I'm always amazed when we see threads like "has the market correction finally begun?" whenever there is a 5% pullback from the recent high. I don't pay close enough attention to the markets to even notice when we have minor pull-backs.


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## Afp (Mar 19, 2013)

larry81 said:


> Hehe [email protected], i remember myself looking at the ticker each morning during our winter southern vacancy with my wife, stock picking is bad for your health i am telling you !
> 
> At this moment i am invested 100%, i am fortunate enough to have a steady flow of new capital coming in monthly and i keep purchasing according to my AA. I have literally about 170$ sitting idle on my TDDI accounts, leftover from my last purchases.
> 
> The only move i would make is liquidate my TFSA (filled with ZRE units) and purchase a speculative position (CHK, CENX, IMG, etc.) but bleh. My current YTD portfolio return is 8.27%, so far so good !



Thank you Larry for answering my questions. [email protected] .... You got many followers/admirers and haters in that thread. It was cool. 

I am in dividend growth camp and I usually keep at least 10% - 20% in cash. After each investment purchase, I try to save up to bring my cash reserve to the previous level again. I have tried to train myself to not thinking about my portfolio total market value but the annual dividend total instead.

There many ways to skin the cat. Yours is a great one. Thanks and wish you best of luck investing.


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## sherwooddavid (May 5, 2009)

I have to admit it feels pretty good looking at my $500K cash in my savings account. I have to thank my FA for advising me to sell my investments a day before they started to drop.


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## humble_pie (Jun 7, 2009)

sherwooddavid said:


> It was on my Financial advisor's advice. He suggested that I sell and go into a more conservative or balanced mutual fund. It just happened that the markets started to drop the day after I sold and I am now thinking about the timing of re-investing.



contrary to couple suggestions in this thread that you should leave your FA, i always thought he had done a reasonably good job. This would particularly be the case if what you had sold were also mutual funds. ie you'd simply be moving from one type of MF to a balanced more conservative MF.

now that you're on the phone, though, what's the guru advising these days re timing of the re-buying. You'd need a hefty crash to compensate for the taxes due on the big sale, no?


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## Pluto (Sep 12, 2013)

sherwooddavid said:


> I sold all my investments about a week ago just before they started to drop(great timing) and now have approximately $500K in cash in my account. I plan on re-investing soon but with the markets still dropping I'm wondering if I should just stay in cash until the end of the year or jump back in now ?


Personally I wouldn't spend a nickel of that money on stocks right now. It is highly possible that you advisor did you a great big favour. Did you ask him why he thought now was a good time to make some changes? That would be interesting. Anyway, I'm not touching this market. This is a great time to have cash and wait and see. 

You need to have a list of quality stocks you want to own. Then you need to have a good idea of what price represents good value. Then buy when your favourite stocks are at good to excellent value. (Contrary to popular but uneducated opinion, such an approach is not market timing.) So you are better off asking people for a list of the highest quality stocks. Then do some research on what price represents good value. Rely as little as possible on the opinions of others. Learn to make your own mind up, and then live with it. For those who are inclined, I preach learning in order to become independent. 

Anyway, in my opinion the market right now is a t high risk of a significant drop. Who knows how much? No way to tell with accuracy in advance. That's why you should stick to quality stocks and have an approximation of good value in mind. Then you don't have to worry too much.


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## sherwooddavid (May 5, 2009)

That's correct humble-pie,my portfolio was all MF that my FA thought were a little too risky for me at this stage of my life(now retired)and the timing to sell was just a complete fluke. I will be going from a balanced MF to a conservative MF but my FA is now putting everything in a 4 month GIC until everything settles down,hopefully by year end. I was told that this change would cost me nothing in fees or additional income tax, the new conservative MF I'm interested in actually have a lower MER than my old ones, so I'm happy about that. 
I'm not an expert but I kind of like my situation now that I just luckily fell into.


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## besmartrich (Jan 11, 2015)

sherwooddavid said:


> I have to admit it feels pretty good looking at my $500K cash in my savings account. I have to thank my FA for advising me to sell my investments a day before they started to drop.


Good call.


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## dime (Jun 20, 2013)

Join the discussion about short term bonds. Finding some yield on your cash (no matter how little) is likely to be better than no yield at all. 
The challenge is to minimize the risk to your capital. Quality short term commercial credit seems to be the way to go. 

Look for the market indexes to fall until they bounce and retest the bottom again. When they 'build a base' in the chart technical patterns, you may have a better idea of when it's safer to re enter at a lower price. No need to sit out for 12 months necessarily.


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## Shekelstein (Jun 7, 2015)

If you just want yield, you should consider high interest savings accounts with credit unions, they pay definitely more than bond yields, but your money won't grow like bond prices usually do during market crashes.


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## kcowan (Jul 1, 2010)

sherwooddavid said:


> I was told that this change would cost me nothing in fees or additional income tax,..


So the implication that this old MF gave you capital gains every year and provided no sheltering/deferral? I know that is true with ETFs. What type was this?


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## godblsmnymkr (Jul 15, 2015)

i wouldnt be very happy paying an adviser to invest in mutual funds for me? sure, if this was an hourly rate/one time fee type adviser that makes sense, but for a 1% fee month-to-month adviser it seems not worth it. almost surely better off couch potato'ing some sort of conservative etf strategy.


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