Wednesday, April 3, 2013

Building up cash or not



cash, euro, bills, coins


Lately I have been thinking about if I should build up some cash instead of directly investing all of it. The downside with cash is of course that I´m getting little interest out of it and that I might be missing the increase in the stock market and standing with that money on the side line.


We have investors such as Warren Buffett that more or less claim to be fully invested all the time... but is he really? I mean he has been hunting his elephant for a long time now and Heinz became one of them but I think he is prepared for one more elephant. That means at least 50 billion $ that has been on the side line.

One big difference between Warren and me is that each quarter he will be getting dividends payments that it could be worth to invest directly, if he would like to. When I get a quarterly dividend payment I would hardly even be able to pay the commission fee with that amount and much less to use it for investing into a new stock. It just isn´t possible. I must always wait until I have at least 1000 € because any investment below that would just be too expensive in terms of fees and ideally it should even be 3000 € per investment.

For me and any person who are just not getting dividends being paid out in such quantity that one can directly re-invest them then it makes sense not to be fully invested all the time and to wait for a moment when the stock market make a correction to then be able to step in with full force.

However... I still see so many cheap stocks out there that I do not think that I will be able to build up a pile of cash at the moment.

Also I think that the good moment to build up a pile of cash is probably when one starts to sell stocks. I have still not entered the investing/divesting cycle of selling stocks and therefore can not use that for building up a pile of money which will hopefully naturally arrive given time as an investor on the stock market. I will think about if I should add a rule such as... when stock A is sold I will keep x % of money for building up a cash pile of reaching max y % of my portfolio.

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