How much of net worth should be invested vs. kept liquid?

[Anonymous]

Anonymous wrote:

Anonymous wrote:My rule of thumb that I tell my clients is to have 3 months worth of expenses saved, in cash, in a rainy day fund (aka savings account). All other should be put to work for you because it's not like your investments aren't illiquid. This is obviously based upon current market conditions being a bull market. Cash or cash-equivalents are paying you tenths of % points in this monetary environment so inflation is causing you to lose value on your savings.

Put it to work for you.[/quote

Agree but my extra is sitting in cash right now waiting for a correction so I can put in equities. I know you shouldn't try & time the market but I'd like to avoid buying high.

What do u think?

Very valid point and concern. Kind of an odd market scenario right now that virtually everything is overvalued but showing no signs of stopping. Someone recently came on CNBC and said that he is witnessing a tech bubble but I'm not certain I agree. No one knows if/when the correction that everyone fears is coming so I am still telling people to be in the market (especially since it's earnings season right now) but be, or have your FA be, on top of things in regards to being able to be on the sidelines if things turn.

[Anonymous]

Anonymous wrote:

Anonymous wrote:My rule of thumb that I tell my clients is to have 3 months worth of expenses saved, in cash, in a rainy day fund (aka savings account). All other should be put to work for you because it's not like your investments aren't illiquid. This is obviously based upon current market conditions being a bull market. Cash or cash-equivalents are paying you tenths of % points in this monetary environment so inflation is causing you to lose value on your savings.

Put it to work for you.[/quote

Agree but my extra is sitting in cash right now waiting for a correction so I can put in equities. I know you shouldn't try & time the market but I'd like to avoid buying high.

What do u think?

I think that despite what you say, you're essentially market timing by waiting, and market timers are almost always losers (relatively).

How much cash are you sitting on? If it's not upper six figures or seven figures I'd skip individual equities and put it in well established mutual funds (not nec. index funds but that's one approach). You might try splitting it into 6 months worth of monthly investments and get some dollar cost averaging benefit out of that, and invest 1/6 each month over 6 months.

[Anonymous]

Not to mention, anyone looking to time the market is in it for a short-term strategy which isn't what I recommend, at all. If you have a time-horizon that will allow for long-term growth, then it's workable. Besides, you (or your professional, if you have one) can always find mutual funds that have a limited downcapture potential to where you can be in the market and, in case of a massive correction, only feel a percentage of the loss. We are seeing more and more of those cross my desk nowadays.