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Cash Was the Best-Performing Asset of 2018. Here's What 'Going to Cash' Means.

Discussion in 'TUG Lounge' started by MULTIZ321, Jan 9, 2019.

  1. MULTIZ321

    MULTIZ321 TUG Member

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    Cash Was the Best-Performing Asset of 2018. Here's What 'Going to Cash' Means.
    By Rebecca Ungarino/ News/ Stocks/ Markets/ Business Insider/ markets.businessinsider.com

    • Cash was last year's best-performing asset, outperforming stocks, bonds, and commodities.
    • After a brutal year for investors across those asset classes, some strategists have suggested cash is an increasingly attractive investment.
    • So what exactly does "going to cash" mean? Here's what investors should know.

    "Cash was the best-performing asset of 2018. It reigned supreme among other investments like stocks, bonds, and commodities. Put another way, cash was the only major asset that posted positive returns last year, with a 1.9% rise, according to Bank of America Merrill Lynch.

    "A perfect storm hit equities in 4Q18 - high oil prices, a strong dollar and a shift upwards in the U.S. yield curve - which altered perceptions towards risk assets and encouraged investors into cash," Sean Darby, the global head of equity strategy at Jefferies, told clients in a report last week.

    Investments of all stripes last year were hit as a confluence of macroeconomic factors - at a late stage in the decade-old economic cycle - swelled and wreaked havoc on the market."...."

    [​IMG]
    Steve Marcus


    Richard
     
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  2. bogey21

    bogey21 TUG Member

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    I prefer Low Duration Bond Funds to cash. Easy to flip into an Equity Fund if/when you decide to make the move. Having said that I have to admit that the LD Bond Fund fund I had my kids in didn't earn a cent during 2018. Although earnings were posted every month the value of the fund fell from $1.00 at the beginning of the year to 91¢ at year end. Their balance at the end of 2018 was only pennies higher than at the end of 2017, but they didn't lose anything either...

    George
     
    Last edited: Jan 10, 2019
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  3. MULTIZ321

    MULTIZ321 TUG Member

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    Hi George.

    Did you mean to say 2017 and 2018 in your final sentence?

    Richard
     
  4. Ironwood

    Ironwood TUG Member

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    There is nothing wrong with going to cash in the short term. The week before Christmas when markets were so erratic, I thought I could go largely to cash on my trading platform fairly quickly....well looking at the technicals for each position took longer than I thought it would, and my indecision on a few favorites cost me. Then I got whipsawed with a few stop losses, setting them before leaving the house with the market falling only to be taken out and left for dust when the market roared back later in the day. It's tough out there trading your own portfolio...you are always following the bots and pro traders who move the market. Just this week, I've had one stock roar and another tank on a profit warning, so I'm treading water. My other half says I might as well go to a casino.
     
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  5. mpumilia

    mpumilia TUG Review Crew: Veteran TUG Member

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    I just keep a lot in cash- checking, savings banks, a couple of CD's, treasury money market fund, I Bonds, stable value fund. Stock and Bond funds- a lot less than the so called experts recommend for our ages. Some are international but a small percentage of our assets. None are sector funds. Most bond funds are short term. Some are short term municipal.

    I am not smart enough to deal with individual stocks and bonds and trading and all that stuff. Heck- I am not even smart enough to deal with the funds we have, but I try.

    Even so I get sick to my stomach when the market goes down. If it were easy to take everything we have and put them into banks I probably would. But they are with a mutual fund company and in IRA's and just one non-IRA brokerage account. And hubby's 401K is the stable value fund. Just 5% company stock (which is the match they give).

    This all said- we don't have millions of dollars to work with. Wish we did- I would keep a million in cash! LOL!
     
  6. am1

    am1 TUG Member

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    Probably why you do not have millions. If I had millions I would have it all invested in different asset types.
     
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  7. Brett

    Brett Guest

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    it's not a question of "being smart" .. it's more about financial education which regrettably isn't taught in high school
    investing early in life with diversified index stock funds can make one a "millionaire" ... not that a million can go a long way if you're in a nursing home with attendant care
     
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  8. PigsDad

    PigsDad TUG Member

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    I get a kick out of all the articles and discussions that comes out every time there is some volatility in the market and everyone thumping their chest, boasting of how they "went to cash" earlier. What we don't hear is all the times those people went to cash and missed out on significant upward market moves. The lost opportunity costs of missing those upswings is huge.

    A market correction doesn't scare me -- I often treat it as a time to increase my savings and investment. I did this in the 2008 correction and have stayed in the market 100% of the time through the longest and most profitable bull market in history and it has paid off in spades. This latest market correction has only taken off a very small portion of my huge gains over the last 10 years, and they are only paper losses. In fact, I have increased my buying recently; I am confident it will pay off again.

    Kurt
     
  9. vacationhopeful

    vacationhopeful TUG Review Crew: Rookie TUG Member

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    These projecting wordsmiths are making money ... off their written columns, TV interviews, new clients, and uptick on what they are 'talking' (actually, pitching) about products.

    Now find a smart financial planner .. his/her clients sell his/her preformance achievements to family, friends, neighbors, etc.
     
  10. Ironwood

    Ironwood TUG Member

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    In my experience trading my retirement portfolio, and I spent my later working years in the business, I have been more successful in going to cash or reducing my exposure as markets when they were beginning to fall, but too hesitant for my own good to jump back in when there was blood on the street, like the last trading day before Christmas. So you are right, I have been able to time getting out better than getting back in. The market technicians always tell you to wait for confirmation the trend has been reversed, but often you will miss the initial 10-25% comeback! Algorithms do it better than I can.
     
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  11. geekette

    geekette Guest

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    I align with Kurt. Market volatility has always been with us and always will be. Which companies went bankrupt lately due to stock market?? No need to feel sick to stomach or go to cash. I have never gone to all cash and never will. I run lean on cash and invest it instead. Do I feel like that has been a mistake? No. I am onboard for the run up, but more importantly, my companies pay me to remain invested, far more than a bank would ever pay me. Cash sitting idle (or nearly so these days) doesn't aid my future, only presents more problems, like, what do I do with it and when? Staying the course has made my life very simple and low on anxiety and activity. I understand buy and hold is not popular but it has been one of the best decisions I have ever made.

    I suppose that looking at things through a specific lens would indicate cash as best asset class in 2018, but my real life data shows that is not at all true for me. My div haul in 2018 was 15% higher than year before, and I did not add any $ to that portfolio. There is no scenario in which my cash would have grown by 15% last year. A smaller portfolio went up over 20% in divs, but that one had new buys so is not just simple math facts, there are asterisks. But, most of the companies in that portfolio granted 5-20% div raises. I can't get that at work, can't get it from a bank. If I have a need for cash, I can simply turn off div reinvestment and pocket the dividends.

    I hope folks use a wary eye to read articles like this and look carefully at their holdings before making moves based on "someone said..." And that includes what I just said. What's appropriate for me is suited to Me. Designed by Me, executed by Me, managed by Me for decades. It is those decades of remaining fully invested that have me yawning at market volatility. Frankly, what's it mean to me?? Nothing, because I am not selling stocks. Oh, well, I suppose it means a little since I have rollover checks that when clear, will have me buying in my rollover 401k and in my Roth (receiving Roth 401k rollover).

    Perspective matters. I will be buying so I am thrilled at Sale Prices! People that didn't sell when the market was up may not like lower prices, but they had the opportunity to sell For Months of very high prices. If greed cost a person profit, well, that's a life lesson to take with them, along with the old idea that you shouldn't have money in the market that you have a short term need for (I would peg "short term" at less than 5 years for most people, but it is one year for me as I have a lot of "risk tolerance").

    Whatever strategy a person has, it is important to follow that strategy in good times and bad. After all, why have a strategy if it is abandoned when a known risk becomes reality? If you know what you are going to do when X happens or if Y comes to pass, it is easy to evade emotions that create stress and bad moves.

    Good luck to all. And remember, it's only money, you can always make more.
     
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  12. rapmarks

    rapmarks TUG Review Crew: Elite TUG Member

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    If I went to cash, I would have such a huge income tax bill I wouldn’t have much left to reinvest.
     
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  13. mpumilia

    mpumilia TUG Review Crew: Veteran TUG Member

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    To be clear I did not make any recent moves. Our positions have been like this for years-since around 2008-2012- EXCEPT a recent 401k rollover which was in stock and bond mutual funds which I had transferred to a Treasury Money Market in Oct after I left the job and left it there- in the money market.

    I learned in 2008 that i do not have the temperament to deal with big losses. (Since in my 20's had lots of stock mutual funds, etc.) I messed up back then and panicked and sold everything that March 2009- at the lowest point. I gradually went back in and when I inherited a little money from my parents- and some from the sale of their home- I vowed to count my blessings and keep it safe. So I really concentrated on investing it in conservative stock and bond funds. Same with our IRA's and my husbands' 401K. And I made sure to have a several years emergency money in cash.

    Now with husband getting close to retirement and not a good pension, and me no longer working, we will have to live on this money and SS and we are not living in a third world country with low taxes and expenses.
     
    Last edited: Jan 10, 2019
  14. CalGalTraveler

    CalGalTraveler TUG Member

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    We took a portion off the table in our retirement accounts (so no tax liability) last spring/summer when the market hit several highs. We were too heavily weighted in stocks vs. fixed with retirement on the horizon. However we still have about 55% of our portfolio in the stock market.

    For the portion we sold, we have been using CD ladders to maximize the returns and also have been using money market funds currently paying 2.3% for funds we accumulate for prop taxes and MF. This has been paying off handsomely. We still dollar cost average monthly into the market from our 401ks so we are benefiting from the dips.
     
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  15. bogey21

    bogey21 TUG Member

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    Yes. I corrected it. Thanks...

    George
     
  16. mpumilia

    mpumilia TUG Review Crew: Veteran TUG Member

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    Yes. But not if the money was within a tax advantaged account like an IRA.
     
  17. mpumilia

    mpumilia TUG Review Crew: Veteran TUG Member

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    Well- I doubt that is why we don't have millions. We just were never big earners- had lots of job layoffs- the generation who had to deal with constant company takeovers of our employers and all that. We have been investing since we were in our 20's whatever we could- started with IRA's. I learned things on my own because my parents did not know anything about investing at all- they were old school.

    On top of this we live in a high tax/expensive state.

    We went through 2 stock market crashes as well. I made some mistakes with some investments. Ex: A Movie Limited Partnership.

    Then we lost money on a condo rental we bought and on the sale of our first home and land lot.

    Luck also pays a big part. We always seemed to go one step forward and 2 steps backward. We were fairly frugal, but also spent a lot money on improvements and upkeep in our homes and did take vacations- though not real expensive ones. We saved and paid for our son's out of state college tuition- a lot of money but we didn't want him to start off life with a lot of debt. We lived life within our means.

    This said, this is where we are at and we have done the best we could and are ok- better than a lot of people are for sure. We are blessed.
     
    Last edited: Jan 11, 2019
  18. am1

    am1 TUG Member

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    One does not have to be a high earner to become a millionaire. One has to invest in stocks and property though. Keeping money in cash will not make one a millionaire.
     
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  19. rapmarks

    rapmarks TUG Review Crew: Elite TUG Member

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    You are definitely right. My aunt worked a low paying job her entire life, but saved her money. She invested very conservatively. She died a millionaire.
     
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  20. Brett

    Brett Guest

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    absolutely true. A low earner can be frugal and make the right decisions on investing and end up with a million dollars or more
    - -- - yes, hoarding cash will probably not make one a millionaire
     
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  21. DavidnRobin

    DavidnRobin TUG Member

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    In a negative market - a portfolio is protected by holding a higher percentage of fixed income (even if that is cash stored in a mattress).

    math... :D


    Sent from my iPhone using Tapatalk
     
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  22. mpumilia

    mpumilia TUG Review Crew: Veteran TUG Member

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    This I know. I was responding to the am1's post stating "millions" in the plural.

    Plus you have to have luck investing in property. Been there. Done that and lost.

    Stocks I don't have but always had stock mutual funds and still do have some.

    Frugal we are. Heck- We wash plastic bags and cut toothpaste tubes. We never eat out or spend money on outside entertainment. We are homebodies and boring.
     
  23. Brett

    Brett Guest

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    million or millions, it's the same idea.
    It just seems like with some of your past comments you were not getting good personal financial advice.
    Investing for the long term should not be dependent on luck.
    Frugality is good but getting good investment advice is better, actually essential if you don't have a good pension
     
  24. geekette

    geekette Guest

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    I guess I'd need to understand what "protected" is supposed to mean. Protected from what?

    Cash is definitely not fixed income, it's Cash.
     
  25. DavidnRobin

    DavidnRobin TUG Member

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    Don’t overthink this... cash was meant to be part of the consideration of fixed income in this statement vs equities. Just like I meant market to be equity market. If you put your cash in a bank and get some low rate, or CD, or T-Bills (short/long term) - etc... to get higher and higher rates - or you stick it in a mattress - the outcome in a negative market (relatively) will be that the higher percent of cash will protect the total assets from decreasing. The less %cash in the portfolio - it is less protected in a potential down market. This is basic - and why I thought the OP article was obvious.
    In a down market - ‘cash’ is a better investment (unless you want to go short).
    Or can always protect equity side using Option Strategies. ;)

    How much do you want/need your money to grow, to what amount, and at what risk? And for how long at what Spend?
    Questions with complicated answers...

    We are fortunate to only have to keep pace with inflation. Over the long haul I have gone from high % equity to high % cash - while saving for the future and staying out of credit debt. It has worked well for me - just like I was taught and practiced... (and failed at times)
     
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