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With Stocks So High, Should Investors Move To Cash ?
One of the ways I have raised cash in a rising bull market when I felt either stocks were over valued or I had reached the upper limits for stocks within my asset allocation was to set up a systematic sell down process as stocks continued to advance.
Essentially, here is what I did. Back when the S&P 500 Index was around 1600 I’d sell about one percent of my equities off for every 25 point of their advancement which equaled, percentage wise, about 1.5% of their upward movement. When my cash reached my targeted level I had the choice to either spend some of it for new purchases, take a cash distribution form the portfolio or just let it ride and stop the systematic stock sell down process. Since my portfolio generates about 1.25% of cash per quarter I stopped the systematic sell down process and started buying around the edges with part of the 1.25% per quarter cash that the portfolio generates.
Since, I have already raised my cash to levels I feel comfortable with in this overvalued stock market (by my thinking) there is nothing left for me to do but wait for the long anticipated pull back. If it comes fine I have been prudent and have plenty of cash to buy the pull back and if stock valuations continue their upward movement well that is fine too as I have plenty of equities at work within my portfolio to enjoy their continued upward march. Year-to-date my portfolio is up about 7.5% through July 3, while the Lipper Balanced Index which is my portfolio's bogey is up about 6.0%. With this, Old_Skeet plans to keep on keeping-on.
I am not saying what I did was the perfect move; but, for me, I felt it was the prudent thing to do.
Comments
One of the ways I have raised cash in a rising bull market when I felt either stocks were over valued or I had reached the upper limits for stocks within my asset allocation was to set up a systematic sell down process as stocks continued to advance.
Essentially, here is what I did. Back when the S&P 500 Index was around 1600 I’d sell about one percent of my equities off for every 25 point of their advancement which equaled, percentage wise, about 1.5% of their upward movement. When my cash reached my targeted level I had the choice to either spend some of it for new purchases, take a cash distribution form the portfolio or just let it ride and stop the systematic stock sell down process. Since my portfolio generates about 1.25% of cash per quarter I stopped the systematic sell down process and started buying around the edges with part of the 1.25% per quarter cash that the portfolio generates.
Since, I have already raised my cash to levels I feel comfortable with in this overvalued stock market (by my thinking) there is nothing left for me to do but wait for the long anticipated pull back. If it comes fine I have been prudent and have plenty of cash to buy the pull back and if stock valuations continue their upward movement well that is fine too as I have plenty of equities at work within my portfolio to enjoy their continued upward march. Year-to-date my portfolio is up about 7.5% through July 3, while the Lipper Balanced Index which is my portfolio's bogey is up about 6.0%. With this, Old_Skeet plans to keep on keeping-on.
I am not saying what I did was the perfect move; but, for me, I felt it was the prudent thing to do.
I wish all … “Good Investing.”
Old_Skeet