Cash is Trash

[TommyIV]

Wall Street Journal Columnist Spencer Jakab wrote their latest piece on the overabundance of cash (or G-fund shares) among investors these days. Looking at historical data, he makes the argument:

Cash earns something these days, but not much—basically zero after taxes and inflation. Over any longer period, the opportunity cost of holding it is likely to exceed that of poor timing in the stock market.

On Friday I reported that 32% of the Auto Tracker's allocations are in the G-fund. Our community may be different from Jakab's argument as many of us are active investors who spend short periods in the G-fund at a time. His argument is against the keeping piles of cash in money markets long-term rather than bonds or stocks. This is especially a concern for younger investors.

I myself am cash heavy right now, but I am not particularly attracted to the price of stocks right now, though I plan to buy when that changes.

Any thoughts or experience to share about cash piles as an investor?

We’re Keeping Too Much Cash in Our Accounts These Days​

 

[tsptalk]

Long term, sure. Bad idea.

But this sounds like a possible contrarian signal for the short-term.

 

[Boghie]

Cash is almost always trash. It is earning <=1%, which will buy you a tent to live on the streets during retirement. However, there are times when 'Zero is Your Hero'. It is useful then.

On the other hand, the 'G-Fund' is a secure spot to hold assets you don't want bouncing around. Today, the 'G-Fund' is earning - in interest, not gains - 4.375%. That is not trash if it is either your safe harbor (if you are say <= 55 or so) or your spending money ( < 7 years from retirement). On the other hand, Part Duo, if you are 35 and need gains then think long and hard about investing in something earning 4%. If you stick in the G for your work life you will basically have another Social Security check during retirement. In fact, the 'G-Fund' investment vehicle IS Social Security bonds...

Now, the 'F-Fund' is actual trash. I've come to that conclusion recently. It would be OK if it were not a fund. In that case you would be buying high quality bonds and living off a known interest rate. But, it is a fund of mixed bonds and it is bought and sold so the return is no longer pure interest.

For an oldster (almost 62) like me, my allocation reasoning is as follows (my last IFT was '30/10/25/20/17'):

Fund	Holding	Reasoning
G-Fund	28%	This maths out to seven years of withdraws needed for retirement
F-Fund	9%	No Impact, No Idea. I'm dumb as a box of rocks
C-Fund	26%	I'm banking on 500 CEOs, CFOs, and other folks desiring growth of their employer
S-Fund	20%	I'm banking that these 4500 CEOs, CFOs, etc. wanting to grow enough to be in the C-Fund companies
I-Fund	17%	See C-Fund

One of the reasons I am tempted to remain in TSP after retirement IS the 'G-Fund'. For a 'Cash' asset it sure has a great return. My Edelman Financial Advisor concurs and is not pushing to have the assets transfered. On the other hand, I think having my assets in one of the Edelman portfolios will provide better diversification and allow me to pull from cash when I withdraw money. TSP yanks it out by allocation percentage which is lame.

Happy Hunting.

 

[weatherweenie]

Cash is almost always trash. It is earning <=1%, which will buy you a tent to live on the streets during retirement. However, there are times when 'Zero is Your Hero'. It is useful then.

On the other hand, the 'G-Fund' is a secure spot to hold assets you don't want bouncing around. Today, the 'G-Fund' is earning - in interest, not gains - 4.375%. That is not trash if it is either your safe harbor (if you are say <= 55 or so) or your spending money ( < 7 years from retirement). On the other hand, Part Duo, if you are 35 and need gains then think long and hard about investing in something earning 4%. If you stick in the G for your work life you will basically have another Social Security check during retirement. In fact, the 'G-Fund' investment vehicle IS Social Security bonds...

Now, the 'F-Fund' is actual trash. I've come to that conclusion recently. It would be OK if it were not a fund. In that case you would be buying high quality bonds and living off a known interest rate. But, it is a fund of mixed bonds and it is bought and sold so the return is no longer pure interest.

For an oldster (almost 62) like me, my allocation reasoning is as follows (my last IFT was '30/10/25/20/17'):

Fund	Holding	Reasoning
G-Fund	28%	This maths out to seven years of withdraws needed for retirement
F-Fund	9%	No Impact, No Idea. I'm dumb as a box of rocks
C-Fund	26%	I'm banking on 500 CEOs, CFOs, and other folks desiring growth of their employer
S-Fund	20%	I'm banking that these 4500 CEOs, CFOs, etc. wanting to grow enough to be in the C-Fund companies
I-Fund	17%	See C-Fund

One of the reasons I am tempted to remain in TSP after retirement IS the 'G-Fund'. For a 'Cash' asset it sure has a great return. My Edelman Financial Advisor concurs and is not pushing to have the assets transfered. On the other hand, I think having my assets in one of the Edelman portfolios will provide better diversification and allow me to pull from cash when I withdraw money. TSP yanks it out by allocation percentage which is lame.

Happy Hunting.

There are other options to the G fund, outside of the TSP. SWVXX for one.

 

[JPH543]

After sitting in G for 20 years, I would agree lol. Never going back to just sit in G long term. I'd rather take the risk in C S or I. Historic 5, 10, 20 year charts well outpace the G even with the risk and ups and downs. I don't agree with overall sentiment that prices are too high to want to be in, there are still plenty of cyclic lows and highs along the way, (regardless of overall price) to take advantage of. I also understand being risk adverse depending on your balance and needs. Oh and like Boghie said, I pretty much pretend like the F fund doesn't exist lol. I have zero interest in bonds.