Sign up  |  Log in

Switching from equities to cash

How does your portfolio look? My current split is: 80% equities, 20% cash. Thinking of moving towards: 70% equities, 30% cash. I am not convinced that forward corporate earnings will support valuations in the coming months

See how TagniFi is helping investment professionals streamline their valuation and analysis process in Excel. Sign up for a free trial today.

How long have you had cash? How long have you been wrong about future stock market returns? What do you think your edge is in predicting macro performance? 

I have had an 80:20 split for the past 5 months. Previously was 90:10. Too me, macro is extremely difficult to predict. That being said, I am thinking of moving towards a slightly higher cash weighting given some global events (china slowing, trade war etc). Are you higher weight in equities?

i only keep track of my current allocation. i wish i kept better track of my allocation over the years. but i have a rough guess. 

in 2015, i had a net worth of ~120k. my only debt was my benz which at the time was like 35k. student loan of 7k. but i had maybe a 10k cash/bonds position. so net of debt i was -25% in cash. pretty ****ing levered! (my care was literally 0, i figured if a recession hit, id hide it out in mba school). (spy cagr is 10%)

i wasnt really bearish until around 2017/2018. net wroth of ~265k. i literally borrowed against my 401k. refied my benz and stuff. i had about 50k cash then. but i had 50k in 401k debt 15k in car debt. 5k in student loan debt. so net of debt i think i was -10% cash. levered but i had really good liquidity. (i was scared that i had to pull out roth stuff, in event i lost my job, so i built up cash) (spy cagr is 9%)

today, i have a net worth of 400k?. i have about 65k in cash. but i have 30k in 401k debt. my student loan is prolly 2k? car debt of 10k. so net of debt i have a 5% cash position. i am continuing to build up cash as i am still bearish, but i am also getting married soon. (i have enough cash imo, but with the market the way it is and starting a fam soon, prolly smart to build more cash, i am thinking maybe another 15k)

I love my cheese. I got to have my cheddar.

I am down to 60% equities (previously 95%). I just don’t see where the growth is going to come from. There’s not much slack left in the economy (unemployment at historic lows) and, absent major fiscal stimulus (to kick the can down the road) or a technological productivity boom, there’s not much room for GDP to grow. Also, wages are starting to tick up, which will put pressure on corporate margins.

Take a look at the chart below.

A lot of people are also pointing to the steepening yield curve as a positive signal, but in all cases except 1998 in the last 40 years, a steepening yield curve after inversion preceded a recession.

It all comes down to probabilities of outcomes and based on the current environment, I’d argue there’s significant asymmetrical risk to the downside.

Hey Hamilton, have a holly jolly Christmas.

How about that increase of wages leading to higher discretionary spending and possibly an opposite reaction in corporate profits? Or higher saving, who knows. Obviously it’s tough to predict.

I’m about 50%-50% in cash and equities. I tried timing a downturn in 2017 when I was 80-85%% cash knowing that the odds were not in my favor and I’ve paid the price for it. For the past 8 months I’ve been putting all my monthly savings into etfs so I’m keeping a largish war chest of cash but I’m not growing it anymore. 

If you're the first out the door, that's not called panicking

Depending on how you measure it I’m more than 100% invested due to the use of leverage. Some is in real estate, some is in peer to peer lending, and the bulk is in stocks (mix of index, systematic strategies with EM focus, and individual bank stocks).

MLA changed my mind on holding cash reserves and I haven’t ever since. I take out loans when I need liquidity. For example I paid for 2 2020 international trips earlier this month along with Christmas shopping. Took out a loan from Marcus and used it until my paycheck came in. Next paycheck the loan will be paid off. Cost me about 10 dollars in interest when said and done, but the opportunity cost of having that cash around for years is huge.

I’m actually 2x levered to the sp500.  Since the market was up this year, this exposure plus my bank picks made me roughly double the index return. But I invest for long time periods and I’ll have plenty of bad years that bring this out performance lower (but hopefully still above) the index 

I think this article sums things up well.

sweet, honorable mention!

cash sucks, but i personally wouldn’t be comfortable with 2x beta exposure at this point. some pockets of the markets look okay though.