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Eh this is a pretty common saying, but there's a long way between currency crisis (which has happened pretty frequently throughout history) and total societal collapse. We're more than a financial crisis away from Mad Max.
You should check out the RoboReport if you have any interest in Robos. It has a good roundup and gets updated every quarter.
In the Emergency Fund robo, 30% is kept in cash, so that much is available instantly. It would then liquidate positions appropriately to rebalance and free up more cash.
Interestingly, I recently found out about accounts that will spread your money across multiple banks to increase your insurred about. For example, [Credit Karma's savings](https://www.creditkarma.com/savings) supposedly uses a network of 800 banks to insure up to 5m.
[Wealthfront](https://support.wealthfront.com/hc/en-us/articles/360022405992--How-does-Wealthfront-offer-FDIC-insurance-) looks like they do the same, up to 1m
Sounds like your beating yourself up over the cash. Investing the 1.3m and keeping 500k cash was very reasonable, you didn't miss out on that much. Figure out the house thing and re-evaluate after that.
Do what you want to do. You have no idea who is replying to you. Just bc they're subbed to FAT doesn't mean they're successful, debt-free or ever will be. Lots of advice here is cliche and they apply it to everyone regardless of their individual circumstances. If you want to keep the cash just bc it makes you feel better, that is OK! It's your money. It's your outcome. If you do decide to put more away, go ahead and do that and don't waste time second guessing yourself. You had a reason at the time. If it didn't turn out exactly how you wanted, learn the lesson and make a different choice next time around. You have a lot of money. You'll likely be set for life if you continue making good choices. Don't add stress by fretting about silly things like not maximizing it all in the short term.
1) Cash is king.
2) You can't successfully time the market over the long haul.
I'd try to reach clarity on a home purchase. From there the decision tree should become much clearer.
The answer is here regarding clarity of purpose. If you do really want to buy a house don’t dump the money in the market. If you don’t plan on buying in the next 12-24 months then it seems like a good time to buy.
Edit: So shiny, thank you!
THIS. IS. THE. RIGHT. ANSWER.
The stock market can drop by huge amounts in short periods of time. Any money that is likely to be spent in less than 5 years should not be in the stock market.Bonds can also drop, though by less dramatic amounts. Then they pay back those drops with interest. Look at the duration measurement of a bond fund and that tells you the period of time it takes to be whole again after a drop due to interest rates. If you need the money in 5 years, you can put it in bonds with a duration of 5 years or less.Cash doesn't earn interest commensurate with inflation, which is why money that doesn't need to be spent for a few years is usually invested into stocks and bonds.Divvy up your money according to your goals. Maybe you'll need to put a down payment of $500k for the house, but would want the rest of the value in a mortgage which will have a lower interest rate than the long-term return rate of stocks/bonds. The down payment should be kept very conservative, depending on your time frame. The rest can go into broadly diversified stock and bond funds.
Timing is a crap shoot. Ten or twenty years from now, it won't make as much of a difference what day you put it in.
Edit: I didn't mean to say that I agree this is a good time to buy a house. It might be, or it might not. Interest rates, local trends, employment numbers - YMMV. But I do agree that the purpose needs to drive the investment choice.
>Cash is king.You can't successfully time the market over the long haul.
>
>I'd try to reach clarity on a home purchase. From there the decision tree should become much clearer.
\^ This. All the FOMO you may have may have experienced from not having that $500k in the market the last 12 months should be rinsed out as you watch that that $500k not be subjected to, and brought to the bottom of, whatever 'this' little moment is. Your plan so far has played out flawlessly.
As above, try and gain some clarity on your RE choices. But even if you don't, if you plan on making that move (or any other move/purchase) in the next few years, your cash holding is rock solid. Any other cash flow/savings that is meant for long time horizons/retirement savings, continue with the set-it and forget-it strategy, and pay the markets no mind until you're in your 40's / 50's and have a target retirement age in sight.
Cash is king is a popular phrase amongst poor people, but the wealthy invest their assets.
Don’t try to time the market. Just buy as soon as you can. The best time to buy is in the past. The second best time is right now.
I really don’t think this is good advice. When your cash comes in drips then buy whenever you can - when investing a windfall you should, in my opinion, average in over a longer timeframe. Ie allocate 25% into equities on this dip, another 25% in the summer, etc.
Better yet, don’t take advice from this board. Most of the people on here will never have the $$ you have. Don’t just buy into the FIRE dogma blindly. This is a lot of money; think about it carefully and get a competent advisor.
In real estate, a lot of cash has been is sitting on the sidelines waiting for the market correction that seems to be arriving.
Edit: downvotes? I mean, what I said about wealthy RE investors sitting on cash is true. I'm in this world.
I disagree. It’s always good to have cash for opportunities. When things get frothy I like to build more cash so I can seize an opportunity when it presents itself weather it be stocks or real estate.
It’s not for timing the market. It’s for anything, really. If a business opportunity presents itself, if the housing market takes a hit I I can a home cheap, if stocks go on sale etc. I’m a big believer in this quote, “Success occurs when opportunity meets preparation.”
So I can’t constantly invest and invest more with my extra cash when an opportunity presents itself? I don’t think this is a novel idea. It’s like people shopping more when there’s a sale even though they shop regularly. Whatever the case, there’s no cookie-cutter, one size fits all investing playbook you have to follow. This is what works for me and it doesn’t have to work for you.
I consider timing the market if you don’t invest at all, stay all in cash and dump it in when you think it’s a good time to invest, like now. That’s not what I’m doing. Mine and my wife’s 401k’s and IRA are maxed out. I have extra cash at the moment because we’ve been saving to buy an investment property which requires a fair amount of capital. We haven’t found any properties that cash flow well in our area and the real estate market is hot. Why the hell would I buy an expensive property for the sake of ‘not timing the market.’ That’s stupid, especially in real estate. I’d rather be patient. So I decided to take an extra 6k and put in stocks right now. In my situation, I think this is prudent. I also think many would agree. I don’t know what this is bothering you so much.
That's not really obvious. Debt loads were already extremely high, and central banks are in a bit of a jam if a debt crisis hits, since they're already below or near zero % interest. If this causes companies to start missing debt payments, that could be a trigger for a debt crisis.
Yet most of them have a much smaller percentage of their assets in cash than the average American.
Not to mention you don’t need cash to get cash. I hold almost no cash yet can access hundreds of thousands whenever I want.
But how did you get into the position if owning things that you could borrow cash against if you never had any cash to begin with?
I always took cash is king to be talking about cash flow.
Yeh exactly. It makes no sense to hold on to cash for any long term purpose. It's not good for the economy when businesses can't pay back their loans, because people are not spending it. That's the whole point of the inflation behind Keynes economics.
"Cash is king" being taken to mean "Holding cash in an account for an arbitrary purpose" sounds like a misunderstanding to me.
Right. Liquidity is king, which you can easily have via margin. So people telling OP to keep his assets in cash with no return is stupid.
Fuck off with the name-calling, that’s a disgusting attitude. I’m still in my twenties. Arrogant asshole.
Lovely except that if his portfolio takes a 15% hit in the course of five days (.....) his ability to extract cash is meaningfully reduced. In his context - so long as a house purchase is on the table - keeping the presumed down payment amount in cash is prudent.
It’s no different than shifting your asset mix as you approach retirement.
The wealthiest guy I know always said Cash is king. He owned about 1,000 homes, used millions in debt to build new construction, but always had plenty of cash.
1. Cash flow is king.
Having assets that make you money is the best way to scale your own wealth.
Real estate is definitely a way to make large jumps in net worth. All while flowing cash.
If tech is your w-2. What can you use from that to leverage more income? Can you house hack or apartment hack? Like maybe rent out a 2 bedroom house or condo you own to your Co workers?
Are you in a major real estate boom area? SF or otherwise?
Buying a house for just you might sound fun. But could you buy a 3-4 bedroom and sub rent your rooms to co workers ?
Or by a 4 or 8 unit and live in one and rent out the others to pay off your bills and make money on the others !
Then in a few years buy yourself a house and keep the apartment cash flowing !
Enough with this reddit house hacking bullshit. Stop nickel and dime ING every life decision. Grow up. Do you want to spend your life charging people to live in your own house like a glorified slum lord? Not because you would be out on the street homeless but because you are a cheap asshole trying to cut every corner
Wow. Show me on the bear where the comment touched you. Take a breath bro!
I’m not saying to be a slum load or nickel and dime people.
House hacking is a legitimate way to make real estate work for anyone. Especially in tight markets or high end areas.
I do understand that some people are using as you’ve described, and I don’t agree with that.
But I think OP should consider it, as a possibility.
If they need to rely on a roomate to afford a house then maybe they shouldn't be buying. That 1200 a month won't make or break them in any way, these people are just cheap assholes like I said
I wouldn’t be able to sleep at night with that amount in cash just sitting there without being earmarked for an investment of some kind, haha.
It’s funny how everybody is different, there’s no right or wrong here because you can’t really quantify your risk tolerance.
That said, I try to keep 6 months of expenses in cash.
> I'm kicking myself a bit because if I'd thrown it all in the market a year ago there would have been some nice gains
Best advice I've ever gotten in investing => *"If we all beat ourselves to not doing in the past because you saw the appreciation in value today, F#@k me, why bother with stocks; we all will be buying lottery tickets!"*
Also, if the markets tanked right after you invested 1.3MM in stock, you would have been saying why didn't you put more in cash.
Remember, hindsight is **always** 20-20 so don't beat yourself over it. :)
Hold fast to your financial plan. Don’t react emotionally to the market, especially when the market itself has been reacting emotionally. If your plan was to use that money for a down payment on a house in a few years, don’t gamble with it today. You might want to look into other relatively stable asset classes, such as CDs or short term treasuries, so you are at least earning a little interest on that money, but while remaining still remaining within the spirit of your initial plan.
As someone who has made and lost significant amounts of money, you will never forgive yourself if you put all your money into the market and it tanks. Having 1.8M is enough. You don't NEED more. Plus, you're young so you can work and continue to add to it. Keep a chunk of the money out as your safety net, and don't feel guilty that you *could* have had more.
Having more won't make you more happy. Losing a lot will haunt you for the rest of your life.
The answer to your question will be driven by how much you are able to save per year from earned income.
If in 2-3 years you can recoup that 500K, then I think having it sit in savings is a lost opportunity. Not that you should just throw it into the market, but you should seriously think about what to do with it instead of putting the decision on the backburner.
Also, depending on your income and where you live, tax on interest is going to eat into your returns. Take a look at Vanguard municipal bond funds - short / med / long depending on your risk tolerance.
I have a close friend who trades for a living, so I copied his allocations on this one. MKTX is Market Axess. Here’s the allocation he chose, which I copied on $50k. Maybe the other $50k this upcoming week depending on the market.
SPY 50%
AMZN 10%
MSFT 10%
MRNA 5%
GSK 5%
GILD 5%
QCOM 5%
MKTX 5%
AAPL 5%
They’re a tech company that licenses software to funds for analytics on corporate bonds I believe. My friend said they’re a good buy right. Probably won’t hold it too long though.
I think your in a good situation, I never invest money that I plan to need in the next 5+ yrs... now I would focus on figuring out this real estate decision
I’ll give you a different perspective:
How much house are you trying to buy?
I’d keep around 30% if what you believe the purchase price of what you want to buy PLUS 1 year of expenses to be really safe then invest the rest.
For me, personally, buying a house cash doesn’t make sense due to mortgage interest tax deductions, inflation making your monthly mortgage payment cheaper over time, and the opportunity cost. Of course this only applies IF you’re going to be in your house 10 or so years at least.
Consider investing the money and using something like a margin loan (low rates on IBKR) to fund the downpayment of your house. With $1.8M, you should be able to get up to $900K margin with a reasonable safety margin..
If you were posting now with $1.2MM and wanted to know what to do, and you took someone’s advice here and within the year you had $1.8MM as a result, would you be happy? Mission accomplished?
What’s your number? If you’ve reached it, or are within easy striking distance of that number, be conservative.
In other words, once you’ve won the game (as you define it), stop playing. You’ve won.
I'm a RE newbie so please excuse my ignorance, but is that true even for multimillion dollar houses? I've heard that for tax purposes, you should only get a mortgage for $1MM at most, so you need to pay for the difference in cash (ex: putting $4MM down on a $5MM house).
The limit is $750K on a jumbo. But that doesn't matter for two reasons:
1. Rates are so low that the additional benefit of a tax deduction is less important than it was when rates were high.
2. There are ways of using a margin loan on existing financial assets to pay the rest of the downpayment and for it to have a similar tax profile as a mortgage. It's been covered on this sub a few times in the last two weeks.
The common wisdom is you don’t invest short term money and subject it to volatility.
I made a post on the normal fire forum recently and everyone busted my balls because I have 125k in cash. What I had to clarify was that:
- 50k is a downpayment
- 7.5k will cover closing costs
- 10k to furnish the place
- 20k to buy a car
- 45k as an emergency SHTF fund
You could’ve invested it for sick gains. You also could’ve lost it and not had the money you need for your downpayment etc.
So no, you don’t have too much cash if you’re planning to spend it in the short term.
People on the subreddits can be too dogmatic.
Timing the market is almost impossible. I genuinely recommend people keep 3 months of expenses in cash, and then any money they would need in the next 3 years (like money for a down payment) in a high yield muni fund (HYD is my favorite).
Have you considered a bond ETF instead of cash? They don't fluctuate with the market, and many pay out a higher yield than your savings account with not much more risk. You can sell it same day like any other stock whenever you need cash. VWALX as just one example is a fund of US federal tax-free municipals that pay 3.3%. I have mostly that for my bond portion of my portfolio. Either way though, 90-10 stocks/bonds (or cash) is considered a safe ratio at your age.
I'm just a fellow investor, not an expert, so this is just my opinion. I did look into around 20 bond funds a couple years ago from internet suggestions, and found that for me, VWALX was the best balance between highest yield and lowest risk. SHYD seems like the same objective as VWALX (tax-free, high-yield municipals). Their expense ratio is 0.3% compared to 0.09% with VWALX, though, so I think you'd make a tiny bit more with the latter. Either would be much better than your current yield though.
My other option I considered was high-yield corporate bond funds, with VWEAX coming out on top (5.3% yield). These corporate bond funds are a little more volatile in price, and are taxable, but they do pay more. Standard higher risk equals higher reward.
At your age though, I'd really consider waiting for the current panic to bottom out, and go all-in on equities, not bonds. The market has always bounced back. Just my opinion.
Thanks for this thoughtful insight! I’m still planning on investing a ton in equities. Just looking for somewhere with slightly better yield to park my emergency fund. :) 0.09% E/R is no joke! I will look at VWALX!
if you have cash, it is as good a time as any to start deploying it. if the market keeps dropping it, that’s the kind of situation you keep cash at hand for
I would try to narrow down how much you think the down payment is and just save that in cash and invest the rest. Interest rates are incredibly low and if the market tanks, I doubt they would raise them. So getting a mortgage is probably more financially sound than trying to buy outright
Personally, I think you are doing it exactly right. If you can mentally write off hat 1.3 as basically a loss (for now) and have the majority of that $500k also tucked away @ abt 2%, you are perfectly fine.
Also considering your age and also being in tech (big tech?) I can assume your income can change quite frequently, and quite drastically. So just ride it out, focusing on the overall picture being your SR% and your cost of living. **Do not let your lifestyle inflate.**
Keep in mind that having $500k on hand liquid puts you in the high, high, high 1% of the population even though that might be hard to believe based on your location/environment.
You can always borrow against your assets (so you're not forced to sell assets at a price you don't like) so I wouldn't worry about having more of your cash invested.
I would have gone for a Money Market fund ETF but each to their own.
Cash is King. Especially if you are trying to buy a house in the time frame you suggested.
Like someone else said cash is king. Don’t try and time to market. Cash is a position and it gives a hedge to your portfolio. The rest of it is already 90% equity.
Not at all. I've always adhere to this philosophy: set aside what you don't mind losing.
I'm pretty sure you have risky investments.There's nothing wrong at all with having one or two million in cash, especially now, and especially if it's such a minimal part of your nw.
Your peace of mind is worth more than potential gains from money you could care less about.
A few more details would be helpful.
1. If you may want to do it in 2-3 years, what’s stopping you from doing it now?
2. What’s your annual income, and how large of a home are you planning to buy?
I am in a similar boat as you. I have a lot in cash & wanted to see what happened with a work situation before I bought a home and planted roots.
I generally follow a friend’s advice who said to keep cash if you think you’ll truly need the money in the next five years. His reasoning was that 95% of five year periods are positive in the stock market, so over five years can be assured, but not under. I haven’t independently verified that number btw.
Out of curiosity, how did you come to that windfall? What sort of path did you take? Doesn’t need to be specific. I’m somewhat generally in the same area (tech) and am curious of how to get a big payout.
I'd not worry about lost gains. You want flexibility. You're maintaining the flexibility. If you want to further analyze, focus on how realistic a home purchase in 2-3 years is and what relative cost that may be. Will it be 20% down on a 2.5M home? Will it be 50% down on $1MM? Try to right size the cash holding and move on from there.
Having a portion of that size in cash is not a mistake, or you were thinking you were going to make a move on a house when you did so.
If that has since changed, then a reallocation could be in order. Ignore all of the nonsense being commented here about “cash is king” and “right time to buy”... the people talking about liquidity know what’s up.
You could put the cash into a money market, but honestly this downward run is indicative of a buyers market. How much further will it go down? Who can say. But what we can say, is that everyone was complaining that stocks/fund were “so expensive” or that there was nothing at a discount at the end of 2019... now you have a chance to get in at EOY 2018 prices.
You could always take advantage of that cash allocation now, and start the reallocation (not financial advice, and not intended to be taken as such. All investment is subject to risk).
At your age, I recommend you read [this paper](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1149340), at the very least the Summary and then the Conclusion.
[This](https://www.reddit.com/r/investing/comments/1omoxx/lifecycle_investing_and_leverage_buying_stock_on/) is a thread discussing an article, about the paper.
Wait for the current market crash to stop, might be awhile.
Could us moving averages as an indicator. You buy when they cross. If this ends up being a few months+, maybe use the 20 day MA and 50 day MA. A more conservative indicator would be 50 day MA and 100 day MA. Use a SP500 or total international stock index to measure.
Just keep cash, given the risk tolerance you described.
With a close to $2m net worth, you have other options such as a collateralized mortgage from your broker.
Or just put a smaller percent of your $500m down payment into stocks (take advantage of long term capital gains)
You can have your cake and eat it too.
https://www.redfin.com/CA/Oakland/186-Santa-Rosa-Ave-94610/home/526674
Buy a multi family in a nice part of Oakland. This quad is a 7min Uber pool to west Oakland and then 5min Bart to downtown SF. If you put the 25% required down payment, you can owner occupy the 2bed top unit for ~$800/month. The write off between depreciation and taxes alone would cover your $800.
In 1 year, everything could change. You might want to get married or move to NYC/Berlin/Singapore. Your partner will have a preference on where to live. This asset will be paying for itself and you have flexibility and freedom to go anywhere.
Or you stay. Now that your mortgage is $800/m, you can save your salary every month and save up for another down payment and buy a single family home when the market cools a bit.
Cash is neither king, nor is it a waste.
1/ 100% cash in a portfolio is folly
2/ 10-20% cash (or cash-like) in a portfolio is a fortress
To illustrate:
80% stock portfolio with 10% expected IRR >> portfolio expected to grow 8% per year
Cash is your fortress of fucking solitude, it helps you weather uncertainties:
a) Lost your job while market is down? Use cash buffer, it prevents you from withdrawing from portfolio at a loss
b) Still has a job while market is down 50%? Use cash to buy at 50% discount. Total portfolio IRR now is juiced from 8% to 12% [(0.8 x 10%) + (0.2 x 10% / 0.5)]
I have it all in cash just because worrying about the market is a pita lol. It's a load off my mind which significantly helps my mental stress. I also don't own a property yet so maintaining cash to prepare for that is important. I imagine after I have the place I want it would be easier to leave cash tied up in the market however it may be performing
You’re not going to find many like minded people here with that mindset but I appreciate your stance and wish you the best. Hindsight bias and an investment horizon of (last) 10 days makes your strategy look good. 10 years less so, but to each their own! Happy FI’ing
For sure! On some level it's incredibly stupid because I'm flat out leaving returns on the table but I think the lack of mental stress is so huge. Thanks and good luck to you too
Not OP, but [the data](https://personal.vanguard.com/pdf/ISGDCA.pdf) shows that lump sum generally wins for long-term investments.
(Edited to add a link to the data.)
I get the emotional appeal of DCA. Just saying that the data doesn’t support our emotions. :)
Here’s a [study on this from Vanguard](https://personal.vanguard.com/pdf/ISGDCA.pdf).
Ehh... I don’t necessarily think it’s that simple. The study isn’t that lump sum will give you a better return, but that it will give a better return for about 2/3 cases (meaning the other 1/3 will do worse). I see DCA more like insurance. Sure, on average I rationally know that the odds are I would make more with lump sum investing. The flip side is that I could have dropped in my lump sum 2 weeks ago, and just watched it drop by 10%. On average equities outperform bonds, but you probably have some bonds in your portfolio. Odds are you will pay more in insurance premiums than you will ever collect, but I am sure you have homeowners, auto, life policies.
All this is really hypothetical to me as I essentially DCA simply on the basis that any excess I have at the end of the month goes into the market. There isn’t ever a lump to invest. But I can see how someone could be emotionally distraught over lump sum investing, especially with markets as volatile as they have been.
28% of your net worth in cash is extremely high, and far too high what someone your age and your net worth should have. Holding on to cash for a 2-3 year time period at that age compounds on the opportunity cost. With a conservative 7.5% annualized return on equities, you're missing out on about $77k in expected returns in just 2 years as you wait on buying real estate.
A more diversified portfolio where you can rebalance for a down payment and get a loan will most likely result in a higher overall return at a lower cost than holding cash.
Use the dip as an excuse to invest it now. It might go up and it might go down in the short run, but in 20 years you'll be glad you did.
Regarding the mortgage. Money is cheap. You can get a mortgage for about the cost you are getting in that savings account.
Invest your$510,000 now and try not to remember that it could've been $650,000.
I think you're fine. I also think you should be monitoring the RE market for the house you want, because you don't know how much more expensive it'll get in the next 2-3 years.
Or could be cheaper. If you are open to market timing equities, you should also be open to potential adjustments in real estate values if there is a "Corona Recession".
Real estate, even poorly performing real estate nets 6% or better, why, oh why would you settle for 2% ever? Here where I am at in Florida we would easily get you 8-12% on almost anything you buy. Glad to help here in Florida if I am able.
Markets are too expensive still. They will fall further, especially into election time. Focus on real estate, but be patient. Why not shop around for a few deals instead of just one?
RE investor here. Its a good idea to diversify into real estate with your net worth. One benefit is it increases cash flow which allows a greater monthly income while with stocks you have to sell but the market isnt always in favorable position to sell. Look into passive multifamily syndications. Overall you are doing good. Once you have cash flow life changes. It will feel less scary to hold less cash when you are getting so much monthly income.
Count money?
https://www.statista.com/statistics/184904/vacancy-rates-for-us-homeowner-units-since-2005/
My market's vacancy rates decreased and rents increased during the crash.
The general guideline is you shouldn't ever have more than 80% of your investment funds in the stock market, and that's for an "very agressive" portfolio. You're somewhere under 70%. That's still considered agressive. That's totally reasonable.
Usually you would want the other 30% or whatever it is invested in something safe that still has a return like bonds. But currently the rates aren't great, so a high yield savings account is fine (even if you could get slightly more with bonds, but who cares, it's fine).
FDIC insures up to 250k per account, so you want to ensure that cash is split up accordingly
By the time this matters their 1.3m is probably in a bigger danger
That’s why I keep most of my emergency fund in SHV. If that loses value we’re all fucked anyway.
What is SHV?
Treasury bond fund.
https://finance.yahoo.com/quote/shv/
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Eh this is a pretty common saying, but there's a long way between currency crisis (which has happened pretty frequently throughout history) and total societal collapse. We're more than a financial crisis away from Mad Max.
Yeah but if there’s a currency crisis would a savings account be any safer?
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Which fund do you use?
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Probably up 2% in the last two weeks.
I’m just glad it’s doing it’s job!
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You should check out the RoboReport if you have any interest in Robos. It has a good roundup and gets updated every quarter. In the Emergency Fund robo, 30% is kept in cash, so that much is available instantly. It would then liquidate positions appropriately to rebalance and free up more cash.
Why own something like that over holding cash?
The yield is basically the rate that savings accounts are chasing.
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I’m not sure. I use Schwab, which doesn’t appear to have a mutual fund equivalent; only the ETF.
So extra reason to make sure its fdic backed
Interestingly, I recently found out about accounts that will spread your money across multiple banks to increase your insurred about. For example, [Credit Karma's savings](https://www.creditkarma.com/savings) supposedly uses a network of 800 banks to insure up to 5m. [Wealthfront](https://support.wealthfront.com/hc/en-us/articles/360022405992--How-does-Wealthfront-offer-FDIC-insurance-) looks like they do the same, up to 1m
Fidelity's cash management account does the same - 5 banks so upto 1.25MM
OP didn't say whether they were married or single. But good point!
FYI this is per bank, not per account
Sounds like your beating yourself up over the cash. Investing the 1.3m and keeping 500k cash was very reasonable, you didn't miss out on that much. Figure out the house thing and re-evaluate after that.
You could buy short term bonds, or short term bond ETFs with some of that cash. It isn't stocks, and you should do better than a HYSA
You’re doing just fine. Since you need the money in the next couple of years, it would be irresponsible to put it all in the market.
Market at the moment is tanking due to the corona virus, this could be a good time to leverage that cash and snap up stocks for the future.
Depends on what the virus does over the next six months or so. China's economic production is down 25% because of it.
Do what you want to do. You have no idea who is replying to you. Just bc they're subbed to FAT doesn't mean they're successful, debt-free or ever will be. Lots of advice here is cliche and they apply it to everyone regardless of their individual circumstances. If you want to keep the cash just bc it makes you feel better, that is OK! It's your money. It's your outcome. If you do decide to put more away, go ahead and do that and don't waste time second guessing yourself. You had a reason at the time. If it didn't turn out exactly how you wanted, learn the lesson and make a different choice next time around. You have a lot of money. You'll likely be set for life if you continue making good choices. Don't add stress by fretting about silly things like not maximizing it all in the short term.
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That’s like the opposite of the argument for diversification
1) Cash is king. 2) You can't successfully time the market over the long haul. I'd try to reach clarity on a home purchase. From there the decision tree should become much clearer.
The answer is here regarding clarity of purpose. If you do really want to buy a house don’t dump the money in the market. If you don’t plan on buying in the next 12-24 months then it seems like a good time to buy. Edit: So shiny, thank you!
THIS. IS. THE. RIGHT. ANSWER. The stock market can drop by huge amounts in short periods of time. Any money that is likely to be spent in less than 5 years should not be in the stock market.Bonds can also drop, though by less dramatic amounts. Then they pay back those drops with interest. Look at the duration measurement of a bond fund and that tells you the period of time it takes to be whole again after a drop due to interest rates. If you need the money in 5 years, you can put it in bonds with a duration of 5 years or less.Cash doesn't earn interest commensurate with inflation, which is why money that doesn't need to be spent for a few years is usually invested into stocks and bonds.Divvy up your money according to your goals. Maybe you'll need to put a down payment of $500k for the house, but would want the rest of the value in a mortgage which will have a lower interest rate than the long-term return rate of stocks/bonds. The down payment should be kept very conservative, depending on your time frame. The rest can go into broadly diversified stock and bond funds. Timing is a crap shoot. Ten or twenty years from now, it won't make as much of a difference what day you put it in. Edit: I didn't mean to say that I agree this is a good time to buy a house. It might be, or it might not. Interest rates, local trends, employment numbers - YMMV. But I do agree that the purpose needs to drive the investment choice.
>Cash is king.You can't successfully time the market over the long haul. > >I'd try to reach clarity on a home purchase. From there the decision tree should become much clearer. \^ This. All the FOMO you may have may have experienced from not having that $500k in the market the last 12 months should be rinsed out as you watch that that $500k not be subjected to, and brought to the bottom of, whatever 'this' little moment is. Your plan so far has played out flawlessly. As above, try and gain some clarity on your RE choices. But even if you don't, if you plan on making that move (or any other move/purchase) in the next few years, your cash holding is rock solid. Any other cash flow/savings that is meant for long time horizons/retirement savings, continue with the set-it and forget-it strategy, and pay the markets no mind until you're in your 40's / 50's and have a target retirement age in sight.
Cash is king is a popular phrase amongst poor people, but the wealthy invest their assets. Don’t try to time the market. Just buy as soon as you can. The best time to buy is in the past. The second best time is right now.
I really don’t think this is good advice. When your cash comes in drips then buy whenever you can - when investing a windfall you should, in my opinion, average in over a longer timeframe. Ie allocate 25% into equities on this dip, another 25% in the summer, etc. Better yet, don’t take advice from this board. Most of the people on here will never have the $$ you have. Don’t just buy into the FIRE dogma blindly. This is a lot of money; think about it carefully and get a competent advisor.
The wealthy have a shit load of cash too.
Um, no, they don't. As a percentage of total assets the wealthy have the smallest amount in cash of any other income group.
In real estate, a lot of cash has been is sitting on the sidelines waiting for the market correction that seems to be arriving. Edit: downvotes? I mean, what I said about wealthy RE investors sitting on cash is true. I'm in this world.
The really wealthy can afford it.
Wait til Monday though, people are gonna get so freaked out over the weekend
Yeah I’m waiting a few days but not concerned at all.
>Wait til Monday though, people are gonna get so freaked out over the weekend This comment did not age well :)
Might not have aged so badly afterall
I disagree. It’s always good to have cash for opportunities. When things get frothy I like to build more cash so I can seize an opportunity when it presents itself weather it be stocks or real estate.
So you try to time the market. Good luck.
It’s not for timing the market. It’s for anything, really. If a business opportunity presents itself, if the housing market takes a hit I I can a home cheap, if stocks go on sale etc. I’m a big believer in this quote, “Success occurs when opportunity meets preparation.”
That's literally fucking timing the market
So I can’t constantly invest and invest more with my extra cash when an opportunity presents itself? I don’t think this is a novel idea. It’s like people shopping more when there’s a sale even though they shop regularly. Whatever the case, there’s no cookie-cutter, one size fits all investing playbook you have to follow. This is what works for me and it doesn’t have to work for you.
No you're claiming it's not timing the market and Im saying buddy you're literally timing the market
I consider timing the market if you don’t invest at all, stay all in cash and dump it in when you think it’s a good time to invest, like now. That’s not what I’m doing. Mine and my wife’s 401k’s and IRA are maxed out. I have extra cash at the moment because we’ve been saving to buy an investment property which requires a fair amount of capital. We haven’t found any properties that cash flow well in our area and the real estate market is hot. Why the hell would I buy an expensive property for the sake of ‘not timing the market.’ That’s stupid, especially in real estate. I’d rather be patient. So I decided to take an extra 6k and put in stocks right now. In my situation, I think this is prudent. I also think many would agree. I don’t know what this is bothering you so much.
I mean today is a pretty objectively good day to buy stock, no?
Perfect phrase to be saying as a market move wiped out 2 years of gains.
*2 months
Both, actually.
On my app current two year returns of S&P 500 are 8.5%
A return to the mean!
Well I'm thinking that's 8.5% over two years so 8.5/2 = 4.25% annual return over the last two years.
Doesn't quite work that way (divide by 2) but that's certainly closer than 8.5. :-)
Yes it is. I’m buying. If you’re selling or freaking out, you’re a moron.
That's not really obvious. Debt loads were already extremely high, and central banks are in a bit of a jam if a debt crisis hits, since they're already below or near zero % interest. If this causes companies to start missing debt payments, that could be a trigger for a debt crisis.
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Nope. I’m buying on margin and cutting my spending so I can invest even more of my income. I had 0 cash before, now it’s negative.
This guy invests.
Cash is king is a popular phrase among people with high eight figure NWs.
Yet most of them have a much smaller percentage of their assets in cash than the average American. Not to mention you don’t need cash to get cash. I hold almost no cash yet can access hundreds of thousands whenever I want.
But how did you get into the position if owning things that you could borrow cash against if you never had any cash to begin with? I always took cash is king to be talking about cash flow.
I had a job... Obviously you need an income to get started on FatFIRE. The question is where you direct that income.
Yeh exactly. It makes no sense to hold on to cash for any long term purpose. It's not good for the economy when businesses can't pay back their loans, because people are not spending it. That's the whole point of the inflation behind Keynes economics. "Cash is king" being taken to mean "Holding cash in an account for an arbitrary purpose" sounds like a misunderstanding to me.
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Right. Liquidity is king, which you can easily have via margin. So people telling OP to keep his assets in cash with no return is stupid. Fuck off with the name-calling, that’s a disgusting attitude. I’m still in my twenties. Arrogant asshole.
Lovely except that if his portfolio takes a 15% hit in the course of five days (.....) his ability to extract cash is meaningfully reduced. In his context - so long as a house purchase is on the table - keeping the presumed down payment amount in cash is prudent. It’s no different than shifting your asset mix as you approach retirement.
The wealthiest guy I know always said Cash is king. He owned about 1,000 homes, used millions in debt to build new construction, but always had plenty of cash.
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Apple isn't a person.
1. Cash flow is king. Having assets that make you money is the best way to scale your own wealth. Real estate is definitely a way to make large jumps in net worth. All while flowing cash. If tech is your w-2. What can you use from that to leverage more income? Can you house hack or apartment hack? Like maybe rent out a 2 bedroom house or condo you own to your Co workers? Are you in a major real estate boom area? SF or otherwise? Buying a house for just you might sound fun. But could you buy a 3-4 bedroom and sub rent your rooms to co workers ? Or by a 4 or 8 unit and live in one and rent out the others to pay off your bills and make money on the others ! Then in a few years buy yourself a house and keep the apartment cash flowing !
Enough with this reddit house hacking bullshit. Stop nickel and dime ING every life decision. Grow up. Do you want to spend your life charging people to live in your own house like a glorified slum lord? Not because you would be out on the street homeless but because you are a cheap asshole trying to cut every corner
Wow. Show me on the bear where the comment touched you. Take a breath bro! I’m not saying to be a slum load or nickel and dime people. House hacking is a legitimate way to make real estate work for anyone. Especially in tight markets or high end areas. I do understand that some people are using as you’ve described, and I don’t agree with that. But I think OP should consider it, as a possibility.
If they need to rely on a roomate to afford a house then maybe they shouldn't be buying. That 1200 a month won't make or break them in any way, these people are just cheap assholes like I said
You need to take the sage advice of JL Collins. Trust me.
Happy cake day 🍰
Not today!
*cries*
Think of it this way. 500k In a savings account. Huge peace of mind that you don't give a fluff what happens, you'll be covered.
I wouldn’t be able to sleep at night with that amount in cash just sitting there without being earmarked for an investment of some kind, haha. It’s funny how everybody is different, there’s no right or wrong here because you can’t really quantify your risk tolerance. That said, I try to keep 6 months of expenses in cash.
Today? You’re a hero.
> I'm kicking myself a bit because if I'd thrown it all in the market a year ago there would have been some nice gains Best advice I've ever gotten in investing => *"If we all beat ourselves to not doing in the past because you saw the appreciation in value today, F#@k me, why bother with stocks; we all will be buying lottery tickets!"*
Also, if the markets tanked right after you invested 1.3MM in stock, you would have been saying why didn't you put more in cash.
Remember, hindsight is **always** 20-20 so don't beat yourself over it. :)
Hold fast to your financial plan. Don’t react emotionally to the market, especially when the market itself has been reacting emotionally. If your plan was to use that money for a down payment on a house in a few years, don’t gamble with it today. You might want to look into other relatively stable asset classes, such as CDs or short term treasuries, so you are at least earning a little interest on that money, but while remaining still remaining within the spirit of your initial plan.
As someone who has made and lost significant amounts of money, you will never forgive yourself if you put all your money into the market and it tanks. Having 1.8M is enough. You don't NEED more. Plus, you're young so you can work and continue to add to it. Keep a chunk of the money out as your safety net, and don't feel guilty that you *could* have had more. Having more won't make you more happy. Losing a lot will haunt you for the rest of your life.
Amen.
The answer to your question will be driven by how much you are able to save per year from earned income. If in 2-3 years you can recoup that 500K, then I think having it sit in savings is a lost opportunity. Not that you should just throw it into the market, but you should seriously think about what to do with it instead of putting the decision on the backburner. Also, depending on your income and where you live, tax on interest is going to eat into your returns. Take a look at Vanguard municipal bond funds - short / med / long depending on your risk tolerance.
If by into the dip today or Monday end of day, with some of that cash. I’m planning on this with about $100k today or Monday. Not sure yet.
What are you buying?
SPY, AAPL, MSFT, GSK, GILD, AMZN, MRNA, MKTX. Heavy on the SPY though. I bought some on Friday and will buy more next week if it drops further.
Any reason SPY over a something like VTI or VTSAX? Also what is MKTX?
I have a close friend who trades for a living, so I copied his allocations on this one. MKTX is Market Axess. Here’s the allocation he chose, which I copied on $50k. Maybe the other $50k this upcoming week depending on the market. SPY 50% AMZN 10% MSFT 10% MRNA 5% GSK 5% GILD 5% QCOM 5% MKTX 5% AAPL 5%
Yeah I googled MKTX but still don't understand what that is?
They’re a tech company that licenses software to funds for analytics on corporate bonds I believe. My friend said they’re a good buy right. Probably won’t hold it too long though.
I think your in a good situation, I never invest money that I plan to need in the next 5+ yrs... now I would focus on figuring out this real estate decision
Seems like a weird question to be asking today of all days. Plenty of opportunity to put it to work in the coming week(s).
I’ll give you a different perspective: How much house are you trying to buy? I’d keep around 30% if what you believe the purchase price of what you want to buy PLUS 1 year of expenses to be really safe then invest the rest. For me, personally, buying a house cash doesn’t make sense due to mortgage interest tax deductions, inflation making your monthly mortgage payment cheaper over time, and the opportunity cost. Of course this only applies IF you’re going to be in your house 10 or so years at least.
likely bay area or NY - 500k is ~25% of a modest+ house in either of those areas. Which is probably the exact reason they left the 500k out
Yeah. 2M buys you a shithole in NYC . You need at least 6M for anything nice.
Consider investing the money and using something like a margin loan (low rates on IBKR) to fund the downpayment of your house. With $1.8M, you should be able to get up to $900K margin with a reasonable safety margin..
If you were posting now with $1.2MM and wanted to know what to do, and you took someone’s advice here and within the year you had $1.8MM as a result, would you be happy? Mission accomplished? What’s your number? If you’ve reached it, or are within easy striking distance of that number, be conservative. In other words, once you’ve won the game (as you define it), stop playing. You’ve won.
you shouldn’t put more than 20% down on a house. if $500k is 20% down, keeping it in savings makes sense. if it’s more than 20%, invest the rest.
I'm a RE newbie so please excuse my ignorance, but is that true even for multimillion dollar houses? I've heard that for tax purposes, you should only get a mortgage for $1MM at most, so you need to pay for the difference in cash (ex: putting $4MM down on a $5MM house).
The limit is $750K on a jumbo. But that doesn't matter for two reasons: 1. Rates are so low that the additional benefit of a tax deduction is less important than it was when rates were high. 2. There are ways of using a margin loan on existing financial assets to pay the rest of the downpayment and for it to have a similar tax profile as a mortgage. It's been covered on this sub a few times in the last two weeks.
Thanks!!
The common wisdom is you don’t invest short term money and subject it to volatility. I made a post on the normal fire forum recently and everyone busted my balls because I have 125k in cash. What I had to clarify was that: - 50k is a downpayment - 7.5k will cover closing costs - 10k to furnish the place - 20k to buy a car - 45k as an emergency SHTF fund You could’ve invested it for sick gains. You also could’ve lost it and not had the money you need for your downpayment etc. So no, you don’t have too much cash if you’re planning to spend it in the short term. People on the subreddits can be too dogmatic.
Timing the market is almost impossible. I genuinely recommend people keep 3 months of expenses in cash, and then any money they would need in the next 3 years (like money for a down payment) in a high yield muni fund (HYD is my favorite).
Why do you like HYD best?
Have you considered a bond ETF instead of cash? They don't fluctuate with the market, and many pay out a higher yield than your savings account with not much more risk. You can sell it same day like any other stock whenever you need cash. VWALX as just one example is a fund of US federal tax-free municipals that pay 3.3%. I have mostly that for my bond portion of my portfolio. Either way though, 90-10 stocks/bonds (or cash) is considered a safe ratio at your age.
What other bond ETFs do you like, and why? A friend is recommending I move some of my emergency fund, currently yielding 1.7% to SHYD.
I'm just a fellow investor, not an expert, so this is just my opinion. I did look into around 20 bond funds a couple years ago from internet suggestions, and found that for me, VWALX was the best balance between highest yield and lowest risk. SHYD seems like the same objective as VWALX (tax-free, high-yield municipals). Their expense ratio is 0.3% compared to 0.09% with VWALX, though, so I think you'd make a tiny bit more with the latter. Either would be much better than your current yield though. My other option I considered was high-yield corporate bond funds, with VWEAX coming out on top (5.3% yield). These corporate bond funds are a little more volatile in price, and are taxable, but they do pay more. Standard higher risk equals higher reward. At your age though, I'd really consider waiting for the current panic to bottom out, and go all-in on equities, not bonds. The market has always bounced back. Just my opinion.
Thanks for this thoughtful insight! I’m still planning on investing a ton in equities. Just looking for somewhere with slightly better yield to park my emergency fund. :) 0.09% E/R is no joke! I will look at VWALX!
if you have cash, it is as good a time as any to start deploying it. if the market keeps dropping it, that’s the kind of situation you keep cash at hand for
I would try to narrow down how much you think the down payment is and just save that in cash and invest the rest. Interest rates are incredibly low and if the market tanks, I doubt they would raise them. So getting a mortgage is probably more financially sound than trying to buy outright
Not after today
Lol too much cash
Put it in gold.
Personally, I think you are doing it exactly right. If you can mentally write off hat 1.3 as basically a loss (for now) and have the majority of that $500k also tucked away @ abt 2%, you are perfectly fine. Also considering your age and also being in tech (big tech?) I can assume your income can change quite frequently, and quite drastically. So just ride it out, focusing on the overall picture being your SR% and your cost of living. **Do not let your lifestyle inflate.** Keep in mind that having $500k on hand liquid puts you in the high, high, high 1% of the population even though that might be hard to believe based on your location/environment.
You can always borrow against your assets (so you're not forced to sell assets at a price you don't like) so I wouldn't worry about having more of your cash invested.
I would have gone for a Money Market fund ETF but each to their own. Cash is King. Especially if you are trying to buy a house in the time frame you suggested.
Why catch the falling knife? You've avoided a big chunk of loss with it in cash. Wait till things stabilize and then invest it.
Like someone else said cash is king. Don’t try and time to market. Cash is a position and it gives a hedge to your portfolio. The rest of it is already 90% equity.
I like to beat myself up over not choosing a tech career. Was the windfall related to your work/career or was it unrelated?
Tell me about you. Where are you? Are you planning on staying where you are?
Not at all. I've always adhere to this philosophy: set aside what you don't mind losing. I'm pretty sure you have risky investments.There's nothing wrong at all with having one or two million in cash, especially now, and especially if it's such a minimal part of your nw. Your peace of mind is worth more than potential gains from money you could care less about.
A few more details would be helpful. 1. If you may want to do it in 2-3 years, what’s stopping you from doing it now? 2. What’s your annual income, and how large of a home are you planning to buy? I am in a similar boat as you. I have a lot in cash & wanted to see what happened with a work situation before I bought a home and planted roots. I generally follow a friend’s advice who said to keep cash if you think you’ll truly need the money in the next five years. His reasoning was that 95% of five year periods are positive in the stock market, so over five years can be assured, but not under. I haven’t independently verified that number btw.
Out of curiosity, how did you come to that windfall? What sort of path did you take? Doesn’t need to be specific. I’m somewhat generally in the same area (tech) and am curious of how to get a big payout.
This week, no. Otherwise, yes.
A Bond ETF would be a good middle ground
Not this week you aren't making a mistake
Can you elaborate on how you inested the 1.8m? Which index funds, etc
I'd not worry about lost gains. You want flexibility. You're maintaining the flexibility. If you want to further analyze, focus on how realistic a home purchase in 2-3 years is and what relative cost that may be. Will it be 20% down on a 2.5M home? Will it be 50% down on $1MM? Try to right size the cash holding and move on from there.
Having a portion of that size in cash is not a mistake, or you were thinking you were going to make a move on a house when you did so. If that has since changed, then a reallocation could be in order. Ignore all of the nonsense being commented here about “cash is king” and “right time to buy”... the people talking about liquidity know what’s up. You could put the cash into a money market, but honestly this downward run is indicative of a buyers market. How much further will it go down? Who can say. But what we can say, is that everyone was complaining that stocks/fund were “so expensive” or that there was nothing at a discount at the end of 2019... now you have a chance to get in at EOY 2018 prices. You could always take advantage of that cash allocation now, and start the reallocation (not financial advice, and not intended to be taken as such. All investment is subject to risk).
At your age, I recommend you read [this paper](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1149340), at the very least the Summary and then the Conclusion. [This](https://www.reddit.com/r/investing/comments/1omoxx/lifecycle_investing_and_leverage_buying_stock_on/) is a thread discussing an article, about the paper.
Wait for the current market crash to stop, might be awhile. Could us moving averages as an indicator. You buy when they cross. If this ends up being a few months+, maybe use the 20 day MA and 50 day MA. A more conservative indicator would be 50 day MA and 100 day MA. Use a SP500 or total international stock index to measure.
Just keep cash, given the risk tolerance you described. With a close to $2m net worth, you have other options such as a collateralized mortgage from your broker. Or just put a smaller percent of your $500m down payment into stocks (take advantage of long term capital gains)
You can have your cake and eat it too. https://www.redfin.com/CA/Oakland/186-Santa-Rosa-Ave-94610/home/526674 Buy a multi family in a nice part of Oakland. This quad is a 7min Uber pool to west Oakland and then 5min Bart to downtown SF. If you put the 25% required down payment, you can owner occupy the 2bed top unit for ~$800/month. The write off between depreciation and taxes alone would cover your $800. In 1 year, everything could change. You might want to get married or move to NYC/Berlin/Singapore. Your partner will have a preference on where to live. This asset will be paying for itself and you have flexibility and freedom to go anywhere. Or you stay. Now that your mortgage is $800/m, you can save your salary every month and save up for another down payment and buy a single family home when the market cools a bit.
Cash is neither king, nor is it a waste. 1/ 100% cash in a portfolio is folly 2/ 10-20% cash (or cash-like) in a portfolio is a fortress To illustrate: 80% stock portfolio with 10% expected IRR >> portfolio expected to grow 8% per year Cash is your fortress of fucking solitude, it helps you weather uncertainties: a) Lost your job while market is down? Use cash buffer, it prevents you from withdrawing from portfolio at a loss b) Still has a job while market is down 50%? Use cash to buy at 50% discount. Total portfolio IRR now is juiced from 8% to 12% [(0.8 x 10%) + (0.2 x 10% / 0.5)]
I have it all in cash just because worrying about the market is a pita lol. It's a load off my mind which significantly helps my mental stress. I also don't own a property yet so maintaining cash to prepare for that is important. I imagine after I have the place I want it would be easier to leave cash tied up in the market however it may be performing
You’re not going to find many like minded people here with that mindset but I appreciate your stance and wish you the best. Hindsight bias and an investment horizon of (last) 10 days makes your strategy look good. 10 years less so, but to each their own! Happy FI’ing
For sure! On some level it's incredibly stupid because I'm flat out leaving returns on the table but I think the lack of mental stress is so huge. Thanks and good luck to you too
> I'm flat out leaving returns on the table Unless you're very creative, you're actually losing money to inflation.
Hi just curious, did you lump sum the whole amount or you DCA over a period of time?
Not OP, but [the data](https://personal.vanguard.com/pdf/ISGDCA.pdf) shows that lump sum generally wins for long-term investments. (Edited to add a link to the data.)
Historically speaking I think return of lump sum > DCA but emotionally speaking DCA it’s easier on the mind especially if the amount is large IMO
I get the emotional appeal of DCA. Just saying that the data doesn’t support our emotions. :) Here’s a [study on this from Vanguard](https://personal.vanguard.com/pdf/ISGDCA.pdf).
Ehh... I don’t necessarily think it’s that simple. The study isn’t that lump sum will give you a better return, but that it will give a better return for about 2/3 cases (meaning the other 1/3 will do worse). I see DCA more like insurance. Sure, on average I rationally know that the odds are I would make more with lump sum investing. The flip side is that I could have dropped in my lump sum 2 weeks ago, and just watched it drop by 10%. On average equities outperform bonds, but you probably have some bonds in your portfolio. Odds are you will pay more in insurance premiums than you will ever collect, but I am sure you have homeowners, auto, life policies. All this is really hypothetical to me as I essentially DCA simply on the basis that any excess I have at the end of the month goes into the market. There isn’t ever a lump to invest. But I can see how someone could be emotionally distraught over lump sum investing, especially with markets as volatile as they have been.
That data is substantially curve fitted to THE best economic time in human history. Markets are not guaranteed to go up.
28% of your net worth in cash is extremely high, and far too high what someone your age and your net worth should have. Holding on to cash for a 2-3 year time period at that age compounds on the opportunity cost. With a conservative 7.5% annualized return on equities, you're missing out on about $77k in expected returns in just 2 years as you wait on buying real estate. A more diversified portfolio where you can rebalance for a down payment and get a loan will most likely result in a higher overall return at a lower cost than holding cash.
Use the dip as an excuse to invest it now. It might go up and it might go down in the short run, but in 20 years you'll be glad you did. Regarding the mortgage. Money is cheap. You can get a mortgage for about the cost you are getting in that savings account. Invest your$510,000 now and try not to remember that it could've been $650,000.
I think you're fine. I also think you should be monitoring the RE market for the house you want, because you don't know how much more expensive it'll get in the next 2-3 years.
Or could be cheaper. If you are open to market timing equities, you should also be open to potential adjustments in real estate values if there is a "Corona Recession".
Real estate, even poorly performing real estate nets 6% or better, why, oh why would you settle for 2% ever? Here where I am at in Florida we would easily get you 8-12% on almost anything you buy. Glad to help here in Florida if I am able.
Markets are too expensive still. They will fall further, especially into election time. Focus on real estate, but be patient. Why not shop around for a few deals instead of just one?
RE investor here. Its a good idea to diversify into real estate with your net worth. One benefit is it increases cash flow which allows a greater monthly income while with stocks you have to sell but the market isnt always in favorable position to sell. Look into passive multifamily syndications. Overall you are doing good. Once you have cash flow life changes. It will feel less scary to hold less cash when you are getting so much monthly income.
What was your strategy for finding tenants in 2008?
Count money? https://www.statista.com/statistics/184904/vacancy-rates-for-us-homeowner-units-since-2005/ My market's vacancy rates decreased and rents increased during the crash.
[https://www.statista.com/statistics/186392/vacancy-rates-for-rental-units-by-us-region-since-2000/](https://www.statista.com/statistics/186392/vacancy-rates-for-rental-units-by-us-region-since-2000/)
Is this proving something? In the midwest (my market) vacancy rates went down during the crash.
$500k yielding inflation-losing yield is not a fatFIrE strategy.
The general guideline is you shouldn't ever have more than 80% of your investment funds in the stock market, and that's for an "very agressive" portfolio. You're somewhere under 70%. That's still considered agressive. That's totally reasonable. Usually you would want the other 30% or whatever it is invested in something safe that still has a return like bonds. But currently the rates aren't great, so a high yield savings account is fine (even if you could get slightly more with bonds, but who cares, it's fine).