Hey guys.....is it a good idea to keep a significant % of your cash in a Vanguard Fund? I'm currently self employed spending most of my time investing/working with a residential builder, and part time playing poker.....I constantly have money tied up with poker or with construction but want to know what to do with the rest of my cash that just sits in a bank account......I was looking at VTSAX earlier and noticed they averaged a 8-9% return over the past 15 years with low costs (.05%).....my thinking was instead of keeping 100% of my on hand cash thats not invested in the bank, I can take say 50% of it, put it in something like VTSAX and if I do need that cash I can sell shares off and move it to my bank.....the downside to this is the variance.....over the past 15 years they've had 3 losing years and those years were fairly rough average about -20% a year......I don't mind taking on the variance if I can earn those kind of returns but I might have to limit early on how much of my cash I stick in there to avoid a big loss early on.....

Since I'm a noob in stocks what do you guys think of this idea? Is this reasonable or am I missing something here? Also how liquid are these shares? I'm under the impression that I can sell off at any time and move the money to my bank but maybe thats not the case......I think I'd spread the money across a number of funds but VTSAX is the first one I looked at.....let me know what you guys think

If you dont mind the risk then its obv more +ev than having cash. You can cashout the shares in a day or two so its liquid enough if you have an emergency.

Most of the kinds of index funds you'd be looking at are very liquid, so selling should not be a problem. If you ever have concerns, look at the volume and average volume of a stock to see how many shares are being traded. The higher the number, the easier it is to move the stock (buying or selling). Price, of course, factors in there, as a higher priced stock will have a tendency to move less based on the larger "units" of measure.

Rather than Vanguard mutual funds you might consider Vanguard etfs.

http://etfdb.com/type/commission-free/vanguard/

Etfs have a couple advantages in that I don't believe they have capital gains until you sell. Some of these sites have checking accounts and atm cards. Thus even though you might have 99% etfs and 1% cash you can take out 5% cash and be charged 1.91% margin at interactive brokers. Your at the poker room and hit a cooler you might be able to take out $500 from atm on margin and be back in the game. Not sure.

IMO now is the not the time. Why not be strategic about when you buy?

I would leave the cash in the bank until I saw an opportunity.

1. Totally reasonable strategy.

2. You seem to understand this strategy takes on more risk/variance in return for more expected value.

3. Your strategy can be executed just fine using only VTASX (it is the whole US stock market).

Your question actually reminds me of an similar situation posed ~ year or so ago on the forum. A poster said he wanted to have $100k at all times for a back up poker bankroll and asked what the best way to achieve this goal at the highest ROI was.

It was Aleximartov who came into the thread saying the best strategy was to invest $200k into the S&P500... to always be 'guaranteed' to have at least $100k when you need it.

The same principle applies here.

wasn't sure what VTASX is/was... i see it's stock market.

past returns aren't current or future returns....... you probably generally know that... if you ever look into fixed income funds - esp. shorter term ones - the future not equalling the past is like a mathematical tautology. tony robbins made this mistake in his entertaining "investment advice" book - i think think it was good read.

growth of money invested in VTI from 6/29/2016 -> 7/9/2017 +22.36%

why?

there are some many vanguard etf's that surely you can find one or two or ten that look solid depending on how you're defining "opportunity".

I assume you mean stay away from real estate/small/mid cap, but what's stopping him from getting into SHY or BND or whatever? isn't that the point of having so many?

edit: SHY obv isn't vanguard, BSV instead I guess. and honestly, VOO is almost never going to have anyone taking a bath...

I feel it is my duty to point out Rand has been saying this for at least 18 months. How long would you wait to be strategic?

http://forumserver.twoplustwo.com/30...40/index2.html

The S&P 500 has gained 21% over that time. He will be right, eventually, but will it be hazardous to your wealth to wait?

Was it Bogle that said, "nobody knows nothing"?

Pretty obvious the best strategy (unless you are one hell of an extremely rare investor or have an unfair advantage) is to keep investing in diversified investments with low overhead costs over time because nobody knows nothing about which way the markets are headed.

This (the post by rand) should be stickied as an excellent example of how timing the market is a bad idea.


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i think you should definitely look at different vanguard options for your money. but you are certainly on the right track......... either keep it very simple - maybe only one fund, like s&p500 - or spread it amongst a bunch of funds - american, emerging markets, high yield, reit etc.

if you couldn't get your $$$$ out of vanguard funds very quickly then i would definitely say you have to look at your ongoing and contingent cash needs...... just make sure you know how fast you can get your hands on cash from your vanguard funds and then spend the $$$$$. it may take some upfront time investment to get it so that you can get/spend the $$$$ very quickly

people say keep $10k in emergency cash - arbitrary amount i choose - so keep it in cash but i don't see why you someone can't keep $11k or $12k in emergency funds but invest it in S&p 500 fund.