I was reading a couple of days ago that Warren Buffett and Berkshire Hathaway sold something like $160B worth of stock last year, and only bought $6B worth, which leaves the company sitting on somewhere between $350-$400B dollars in cash. Buffett is among those that think the market is overvalued. It makes sense that he'd sit on cash reserves to watch for corrections to offer real buying opportunities.
I've been pondering how to imitate that on the "real world" scale, and whether it even makes sense for an "average" investor to try to build up cash reserves.
My state retirement and health savings account are pretty much set-and-forget. It's the time of year I'm making the maximum allowed contribution to a Roth IRA. I've got an emergency fund that's approaching 9 months' worth of expenses stashed in a high-yield savings account at 4.3% There's a dedicated account for home and auto repairs and improvements that gets topped up on a regular basis. I don't have any unsecured debt, so the rest of what doesn't go out in expenses usually goes into a brokerage account. It's this last bit that I'm wondering about. That brokerage account usually returns better than the 4.3% or less I can get in savings interest. So it's a no-brainer, right?
But the market is overvalued by any traditional definition, and a lot of voices are saying to expect middling returns on the market in the next few years, and I am five-to-seven years from retirement. Maybe I should build up some cash reserves to take advantage of any market corrections that happen?
Any of y'all trying to build up cash?
Sounds like you're doing ok. I'm just trying to make ends meet at this point. Besides maxing out my 403(b), I'm saving $0.
Well, it wasn't my intent to get into a measuring contest.
If you're maxing out your 403(b), I expect you're equaling my state contributions and my Roth IRA contributions. So that's not nothing. My state contributions were set 21 years ago, and I was in a very different place then than now, so they're lower than they should be and I can't change them unless I take a job at a different agency, which I've chosen not to do. I started the Roth to make up for the minimal state contribution level.
You and I are at different places in life, T. I'm done raising kids and paying for college. All I have to do right now is plan for retirement.
That I have a spouse that is frugal to the far fringes of fanatical parsimony makes life easier. I've almost got her talked into taking a trip to Europe or Hawaii, maybe. But if I tried to turn that into a yearly thing like many of our friends, well...there'd be a search on for my eviscerated corpse. Whatever. She doesn't bitch about me buying guitars or guns.
