I am a complete novice when it comes to investing. I have an advisor at one of the big firms, but he doesn't really teach me anything, just asks me to send him lump sums every now and then to put into mutual funds I suspect. I have $190k in a cash brokerage account with Merrill Lynch that initially started at 5% or something like that. It has dropped significantly and the broker is wanting me to hand it over to him to put into the market. Should I do that? I usually keep around $40k in my normal day to day checking account which has always seemed to be enough. Any thoughts on this?
Is it smart to have a lot of cash on hand?
3,334 Views |
36 Replies |
Last: 21 days ago by Proposition Joe
$190k in a cash brokerage account and $40k in checking (getting interest on that? Savings account? ) seems way too high. Why do you need that much liquidity? Do you have a HELOC you can have in reserve if the need arises?
Age
Daughter who might get married soon
Home and other life expenses, etc.
Those could all be a factor in your decision, but that still seems high - you are missing out on a great stock market IMHO.
There are others way smarter than me on financial stuff here...
Age
Daughter who might get married soon
Home and other life expenses, etc.
Those could all be a factor in your decision, but that still seems high - you are missing out on a great stock market IMHO.
There are others way smarter than me on financial stuff here...
Yes, the $40k is just in a normal BOA checking account, but we live in Austin and have kids, so we drain and replenish that quite often. As of right now, I have $2.6m in the market, $70k cash value on some life insurance policy I know nothing about and roughly $800k in home equity. I have a small business (law firm) and this all just kind of creeped up on me over the last ten years. I'm 47 and just want to make sure I'm positioned right to not lose it all to my own ignorance and stupidity.
I'm in about the same position, lawyer 54, but slightly less b/c because of the hit I took in divorce in my 40s.. I don't have kids to worry about so I don't have to worry about unforeseen costs that need cash as much. You shouldn't be worried about "losing it all," just fear of missing out (FOMO) on higher returns. But higher return is higher risk. You are still pretty young and can work another 20+ years if you want. (If AI doesn't take our jobs).
I'm still worried about an upcoming market correction and the delayed effects of tariffs.
I may have more risk tolerance but with that much equity in the house, I'm sure you could get a low-interest HELOC in case an emergency popped up so you wouldn't have to fire sell stock in a down market.
I'm interested to see others opinions as well.
I'm still worried about an upcoming market correction and the delayed effects of tariffs.
I may have more risk tolerance but with that much equity in the house, I'm sure you could get a low-interest HELOC in case an emergency popped up so you wouldn't have to fire sell stock in a down market.
I'm interested to see others opinions as well.
Juan Lee Pettimore said:
I am a complete novice when it comes to investing. I have an advisor at one of the big firms, but he doesn't really teach me anything, just asks me to send him lump sums every now and then to put into mutual funds I suspect. I have $190k in a cash brokerage account with Merrill Lynch that initially started at 5% or something like that. It has dropped significantly and the broker is wanting me to hand it over to him to put into the market. Should I do that? I usually keep around $40k in my normal day to day checking account which has always seemed to be enough. Any thoughts on this?
Need more info to assess:
1) What is the current interest rate on your cash?
2) Is the cash account a money market fund, a BoA savings account, brokered CDs, or something else?
3) Is the $190k in a brokerage sweep account, where all cash gets automatically moved to the high-yielding money market?
4) If #3 answer is no, do you move any extra cash into the higher-yield fund any time you accumulate any cash?
Our household has a Schwab account with a high-yielding money market (currently paying 4.13%) without an automatic sweep process (I have to manually move cash over, which processes next-day, and to invest it, the reverse has to happen, which means I have to wait a day to get the cash, or incur a one-day margin loan). We also have a Fidelity account that automatically sweeps any cash into a high-yielding (3.96%) money market fund. I strongly prefer the Fidelity sweep approach, but the Schwab rates are slightly higher, and their trading capabilities are much better.
If any of your brokerage cash is earning 0% or something negligible, call Merrill to get it into a sweep account (ideally) or their best yielding money market fund right away.
$230k cash is a lot unless you are actively looking for investments where a large, quick, cash payment would give you an advantage.
Doesn't sound like that is the case
Doesn't sound like that is the case
Close to $4MM net worth...yeah you sound like a real dummy fumbling your way around...
No sir, not looking to acquire anything anytime soon. Whenever I get a draw or bonus, I would just stick it into that Merrill brokerage account. At some point last year it got up to around $480k so I gave the broker most of it to invest. But I still have $190k that I don't know what to do with. I didn't want to give him everything, but now I see I probably missed out on that $190k growing in this current market. So should I just give him all of that $190k too to invest in the market? We owe about $300k on the house, but it's at a 2.15/15 so I didn't think it was smart to pay that off right now, but what do yall think? No other debt besides the mortgage.
I honestly have no idea how it got to this point. Once I broke off from the big firm and hung my own sign, it just went crazy. It really is the favor of the Lord and nothing to do with me. But I have not had the time to learn all I should know about investing and envy you guys like crazy.
I say keep doing what you're doing and you'll be more than fine. I'd invest a good bit of that extra cash myself, but I'm no expert. I'd also consider getting rid of your "guy" if he's not helping you understand it and just wants you to invest in mutual funds for a sweet cut.
ps...I first hung my own shingle 23 years ago...
ps...I first hung my own shingle 23 years ago...
For most people, keeping $230k in cash is probably not a good thing, but since your net worth is around $3.7MM, then its likely ok to have that much cash on hand.
What I would do is take half of your $230k cash and invest smaller chunks every month into an S&P 500 fund like VOO. I imagine thats what your financial advisor is probably doing anyway. Invest half of your cash and keep the other half in a high yield savings account.
If you still have a balance on your mortgage then maybe use some of the $230k cash to pay it off, or pay a chunk of it off.
What I would do is take half of your $230k cash and invest smaller chunks every month into an S&P 500 fund like VOO. I imagine thats what your financial advisor is probably doing anyway. Invest half of your cash and keep the other half in a high yield savings account.
If you still have a balance on your mortgage then maybe use some of the $230k cash to pay it off, or pay a chunk of it off.
No matter what amount of cash you have sitting, it should be earning at least around what a CD or treasury yield is.
That can be accomplished in a number of different ways - aforementioned sweep accounts are one, but also finding savings accounts that have higher yield and setting your checking to pull from savings as needed.
But the people who have cash just sitting there earning sub 0.5% are just pissing money away.
That can be accomplished in a number of different ways - aforementioned sweep accounts are one, but also finding savings accounts that have higher yield and setting your checking to pull from savings as needed.
But the people who have cash just sitting there earning sub 0.5% are just pissing money away.
2.15 15yr Mortgage. Why pay that off? You can get better returns on investments.
Where is your ML cash; I took mine out of their preferred deposit account a couple of years ago because they kept monkeying with the rates and put it into TFDXX which is pegged to Fed Funds and is currently around 4.35% (see how much longer that lasts though). You can access withdrawals after the market closes each day so it's fairly liquid.
Assuming it's in a money market earning around ~3.8-4% I wouldn't say 7% of your investable assets in a money market is that big of a deal. Your advisor likely wants you to have some money on the side lines in case an investment opportunity pops up.
Juan Lee Pettimore said:
We owe about $300k on the house, but it's at a 2.15/15 so I didn't think it was smart to pay that off right now, but what do yall think? No other debt besides the mortgage.
I'm in a similar situation. Owe 200K on a 2.0% 15 year. 11 years left but its only going to be like 18K in interest remaining
We're getting a little inheritance money and wife asked a few days ago if we should put it on the house.
I said even if we got 200K in inheritance, enough to pay off the loan it only makes us the 18K over the 11 remaining years. Put the 200K in a brokerage account, mix of mostly stocks and some bonds that earns say 7% on average. Year 1 we make 14K and by year 2 on average we've made a lot more than the 18K we owe in interest. Even if the market doesn't cooperate for a while, the odds that we aren't up a lot more than 18K after 11 years is tiny. On average we probably double the 200K, turning it into 400K
400K > 18K
Ag CPA said:
Where is your ML cash; I took mine out of their preferred deposit account a couple of years ago because they kept monkeying with the rates and put it into TFDXX which is pegged to Fed Funds and is currently around 4.35% (see how much longer that lasts though). You can access withdrawals after the market closes each day so it's fairly liquid.
That's EXACTLY what I'm in. Rate started off great but then they gradually crammed it down. I just emailed the rep to ask him what it is now because I can't even find that info on my online account. I am looking into the account you suggested now. Thank you very much.
Juan Lee Pettimore said:
Yes, the $40k is just in a normal BOA checking account, but we live in Austin and have kids, so we drain and replenish that quite often. As of right now, I have $2.6m in the market, $70k cash value on some life insurance policy I know nothing about and roughly $800k in home equity. I have a small business (law firm) and this all just kind of creeped up on me over the last ten years. I'm 47 and just want to make sure I'm positioned right to not lose it all to my own ignorance and stupidity.
LOL so on the one hand you are worried about your own ignorance and stupidity
on the other you are an attorney and have 3 million in assets and worried over what to do with $40K?
I'm sorry for the stupid post. I can delete it. Investing seems to be an art and I just haven't had time to learn it. I appreciate your response.
Juan Lee Pettimore said:
I'm sorry for the stupid post. I can delete it. Thanks for your response.
Please ignore him - he's a message board troll.
Cash is fine to have. Allows flexibility.
Also if you decide you want to deploy some of that cash you can do it over several months.
Also if you decide you want to deploy some of that cash you can do it over several months.
You can easily calculate what it's earning in composite by looking at your account activity on Merrill's website . As long as it's a competitive rate there's nothing wrong with having that much cash. It's not like it's some huge % of your assets
Mine is earning slightly over 4% right now . Wouldn't be surprised if yours is the same .
Mine is earning slightly over 4% right now . Wouldn't be surprised if yours is the same .
I keep roughly $180k in cash for a rainy day fund. I've got it parked in TMCXX which I think is paying ~4.3%. It's paying me out about $7k per year so it's not like it's just sitting there doing nothing. I think this is entirely up to the individual, what they have on the horizon, etc.
You are obviously doing just fine, but you've are clearly a Christian person and the Lord has blessed you, so allow me to pass on an additional blessing. You are a bit late to the party, but I would strongly suggest you consider investing $400K to $500K in Bitcoin. This investment will likely quadruple+ in value over the next 5 to 6 years, and there's nothing else that is going to do that.
Disclaimer: Random guy on the Internet - not financial advice, not responsible if you lose money, etc.
If you chose to follow this advice - I would appreciate an invitation to your retirement party, which I suspect is going to be amazing with the money you will have.
Disclaimer: Random guy on the Internet - not financial advice, not responsible if you lose money, etc.
If you chose to follow this advice - I would appreciate an invitation to your retirement party, which I suspect is going to be amazing with the money you will have.
Nah, you should put all that cash into WWR and join the real party.
https://texags.com/forums/57/topics/3545922
... I bought some Bitcoin back in 2020 and it's been fantastic. I, too, hope it continues to go up and will buy some more, if my damn bank will turn on wire transfers. The incompetent fools at the local branch screwed it up.
Also, a little mea culpa. I have about $70k in cash but all but $20k of it is getting 4.22% in a Money Market Fund. I'm waiting on investments that spark my interest.
https://texags.com/forums/57/topics/3545922
... I bought some Bitcoin back in 2020 and it's been fantastic. I, too, hope it continues to go up and will buy some more, if my damn bank will turn on wire transfers. The incompetent fools at the local branch screwed it up.
Also, a little mea culpa. I have about $70k in cash but all but $20k of it is getting 4.22% in a Money Market Fund. I'm waiting on investments that spark my interest.
There are a few bona fide financial advisors on this forum, but I can't imagine they can give good advice without knowing your full financial picture and future plans. There are many more people who play financial critic, or advisor, to people on this forum. Consider me one of the latter.
If you're here asking questions, your current financial advisor isn't doing their job.
If you're here asking questions, your current financial advisor isn't doing their job.
RightWingConspirator said:
I keep roughly $180k in cash for a rainy day fund. I've got it parked in TMCXX which I think is paying ~4.3%. It's paying me out about $7k per year so it's not like it's just sitting there doing nothing.
would be paying you over 10K/month in MSTY/ULTY
EliteZags said:RightWingConspirator said:
I keep roughly $180k in cash for a rainy day fund. I've got it parked in TMCXX which I think is paying ~4.3%. It's paying me out about $7k per year so it's not like it's just sitting there doing nothing.
would be paying you over 10K/month in MSTY/ULTY
I like YieldMax funds, but to be fair, given their track record, you'd have to consider a large portion of that "income" as almost like a return of principal.
Forget the broker and their fees. Start your own brokerage account on vanguard. I would begin putting in 5-10k a month in the vanguard account in VOO. That way if the market takes a dip it won't hurt as bad like it would if you did a lump sum transaction. Long term it will do better than the interest rate you are currently getting & you will do better than your broker because you won't have him skimming off the top. If you are determined to use your broker then still transfer the cash the same way to minimize your risk.
$DHY and $CIK, both by Credit Suisse, are paying 8.7% and 8.9%, and are not very volatile. I'd put some of your money market funds in one or both of those.
Juan Lee Pettimore said:Ag CPA said:
Where is your ML cash; I took mine out of their preferred deposit account a couple of years ago because they kept monkeying with the rates and put it into TFDXX which is pegged to Fed Funds and is currently around 4.35% (see how much longer that lasts though). You can access withdrawals after the market closes each day so it's fairly liquid.
That's EXACTLY what I'm in. Rate started off great but then they gradually crammed it down. I just emailed the rep to ask him what it is now because I can't even find that info on my online account. I am looking into the account you suggested now. Thank you very much.
When I called they got me into the institutional account with the higher rate (which is what TFDXX is), make sure you ask for it as well.
Milwaukees Best Light
Joined:
Nov 1, 2007
Posts:
18,373
How long do you want to ignore this user?
AG
ag0207 said:
Forget the broker and their fees. Start your own brokerage account on vanguard. I would begin putting in 5-10k a month in the vanguard account in VOO. That way if the market takes a dip it won't hurt as bad like it would if you did a lump sum transaction. Long term it will do better than the interest rate you are currently getting & you will do better than your broker because you won't have him skimming off the top. If you are determined to use your broker then still transfer the cash the same way to minimize your risk.
Don't do this. Find a new financial advisor. If you want a recommendation, just ask. Interview a couple. Just going off your posts and the thread title, you studied law more than finance. Hire a pro. Nothing wrong or shameful about it.
Milwaukees Best Light said:ag0207 said:
Forget the broker and their fees. Start your own brokerage account on vanguard. I would begin putting in 5-10k a month in the vanguard account in VOO. That way if the market takes a dip it won't hurt as bad like it would if you did a lump sum transaction. Long term it will do better than the interest rate you are currently getting & you will do better than your broker because you won't have him skimming off the top. If you are determined to use your broker then still transfer the cash the same way to minimize your risk.
Don't do this. Find a new financial advisor. If you want a recommendation, just ask. Interview a couple. Just going off your posts and the thread title, you studied law more than finance. Hire a pro. Nothing wrong or shameful about it.
Just curious at what you think is wrong with this advice? He has the majority of his money with a broker already. This is money that is basically sitting and not earning much at all. Dollar cost averaging into the s&p500 is not typically viewed as a risky strategy.
Obviously there are many opinions on investing. I have been using a financial advisor for years and still do. I wanted to become more financially literate and began with the strategy outlined above. I still invest with my advisor but I also opened my own brokerage account and over the last 10 years it has outperformed what my advisor has done. I still keep/use my advisor because they use some investment strategies that I don't to diversify my portfolio.
To make myself clear, I wasn't suggesting he stop using his financial advisor/broker. This excess cash would be a great opportunity to start to learn more about finances and using an index fund like VOO is about as safe as you can get.
OP
DO NOT TAKE ALL OF YOUR MONEY OUT THAT IS INVESTED AND START INVESTING IT YOURSELF. But starting with what you have in cash is a great way to learn.
"I gave the broker most of it to invest."
NEVER forget.... It is YOUR money and no one cares as much about it as you do. You need some basic knowledge to monitor what your broker is doing with it.
NEVER forget.... It is YOUR money and no one cares as much about it as you do. You need some basic knowledge to monitor what your broker is doing with it.
Not necessarily a wrong answer to have that much cash on hand. It depends on your entire finanical situation.
We have 2 years of cash on hand (wish I had 3 but we just bought a car and new, unexpected HVAC for the house) earning 4%+ in online savings.
Many would say that's stupid and I would retort with I already have enough elsewhere to live off of. Few ever factor this half of the equation. You don't need every dollar in equity markets if what you have is already enough. Having this much cash on had is part of our overall financial strategy.
We have 2 years of cash on hand (wish I had 3 but we just bought a car and new, unexpected HVAC for the house) earning 4%+ in online savings.
Many would say that's stupid and I would retort with I already have enough elsewhere to live off of. Few ever factor this half of the equation. You don't need every dollar in equity markets if what you have is already enough. Having this much cash on had is part of our overall financial strategy.
Featured Stories
See All
62:04
19h ago
6.3k
8:29
30m ago
514
36:46
2h ago
1.4k
Players to Watch: No. 19 Texas A&M vs. Utah State
by Olin Buchanan
This is the Aggie Spirit, fueled by The Association of Former Students
by The Association of Former Students
LukeEvangelist
Recruiting Update for A&M Basketball: in-home and official visits
in Billy Liucci's TexAgs Premium
30
JeremiahJohnson
Recruiting Update for A&M Basketball: in-home and official visits
in Billy Liucci's TexAgs Premium
20