Reserves in Stocks a bad idea?

Question

Hey!

I was just wondering what everyone thinks about keeping your reserves in a 60/40 stock/bond portfolio? Maybe having a slightly larger amount of reserves than normal to be able to withstand any sort of downturn?

let me know what you think! Thanks

Joe Villeneuve · Answer

You mean put money that you would need in the case of an emergency, in a low return/unstable location where you have no control over how well it does, and will cost you when/if you need to access it for that emergency,...which by definition would mean you'd need it "right away"?

Dominick Johnson · Answer

High yield savings account is the way to go. I’m currently receiving 3% interest on my reserves through Ally Bank. That’s a lot better return than the stock market this year.

V.G Jason · Answer

For personal savings, I don't see too much of a risk of doing a small percentage of your savings in something that's going with the market(for better or worse). Like 5-20% depending on how you're set up. For asset or business reserves, straight cash + line of credit. I'd keep 6 months of bills(PITI + utilities + any monthly fee) + 1 capex expense per asset($10-20k).

Carlos Ptriawan · Answer

lately, the classic stock 60/40 bond portfolio is no longer working. But It can work if you hedge it, for example, you can hedge it into:SPX 50/30 bond/TBT 10/SDS 10 , this is like 80% long and 20% short ; you still have long bias but if market crash you have bit of protection.

Nathan Gesner · Answer

It's an option, but you run the risk of needing the money in a down market and taking losses, plus the fees involved. I think it's better to keep liquid cash until you're big enough that you can get a line of credit as your safety net. A line of credit doesn't cost anything when it's not used so your money is freed up for investments.

Bill B. · Answer

If you never need them you can keep them in anything you want, even IOU’s from your beer buddies. I’m sure some people were bragging how smart they were keeping their reserves crypto.

Eventually you’ll be big enough where your “reserves” can be lines of credit or credit cards with large credit lines. Until then  it’s cash or CDs with 1 month of interest penalties.

John Morgan · Answer

@Luke Doyle

That’s what I’ve been doing since I started investing in RE 7 years ago. I’d rather have my $ work for me while it’s just sitting there as emergency reserves. I’ve actually taken out 92k from our Roth IRAs over time (all tax free since it was just the principal-not the earnings) out over for RE (buying, rehabs and cap ex), and I just sold the stocks that had done well each time I tap into my stocks. Some people might think this is too risky, but I’m ok with a little risk to get ahead.

Nate Sanow · Answer

I know someone who did it and would liquidate it…to buy rental properties. Kind of ironic, but it did work for him.

Allan C. · Answer

@Luke Doyle high yield savings account or a

T-bill ladder is where I park reserves at the moment. Stocks are risky as others mentioned.

Chris Seveney · Answer

@Luke Doyle

1. You want something liquid. So stocks are an option.

2. Are stocks volatile right now - yes. If you went with a dividend low volatility stock and some bonds it would not be a bad option. I know people knock stocks since they are getting battered right now but there are still some good options just like real estate is going to take a beating but still have some good options

Reserves in Stocks a bad idea?

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