About a year ago, I stopped my monthly contributions to my ETF portfolio. Officially, due to the increased risk at the job: I wanted more cash. With hindsight it might have been a valuation issue. My last buy was in June 2016 – rebalancing my emerging markets exposure.
The intention to stop investing was to increase our cash stash. Objective achieved!
Some might argue that such a stash of cash is a waste of “time in the market” returns.
Yes, you are right!
Good news: As from January, that cash was put back to work as margin for my option trading. So, they could not profit that much from a dolce-far-niente.
Timeline – Focus on the world index
The last buy of my world tracker took place on March 24 2016 at a price of 35,93€. Today, it is at 41.82€. That hurts, that is a lot of missed “time in the market”. It could have been the opposite as well. It is what it is, we are where we are. What matters is where we go now!
What changed my mind
Over the course of the summer, I have been listening a lot to podcast that talk about investing surplus cash and index investing. There are only a few things that are sure:
- Nobody knows what is next. Literally, nobody!
- Market crashes happen.
- The markets (S&P 500 index) has in the past always recovered.
So, the question to me comes down to point 3: Will the market in the future recover again?
There are sample of economies that did not recover. Japan anyone?
The Belgian total return index has only slightly recovered.
The S&P 500 has always recovered. (There is a great post on this by BIG ERN)
As I do not have the answer, I decided to go with my beliefs: The world economy over the long run will always recover. When it does not recover, something more serious might be ongoing.
It is thus my personal conclusion that with our current level of risk tolerance, with the current level of our cash and semi-cash buffers, the best option for our monthly cash surplus is investing.
Previously, I did not write down our personal investment plan. I had no guideline in case of doubt. Here we go!
Each 5th of the month (or first working day after) Mr. ATL will invest the cash surplus from both salaries in one of our three ETFS in order to bring back our allocation as close as possible to the target allocation.
The current cash surplus will be used to top up the monthly investments and to create some fishing orders 10 and 20 pct below the current market.
With this written down plan, I expect to stay the course!
Any advice for me? any thoughts?