Buying into great businesses with good long term prospect is the key tenet of Warren Buffett's investing philosophy. However, he also notes that the entry price must be sensible, else it will take a long time for the intrinsic value of the business to catch up with the price paid.
At times when investments opportunities are not available, what would you do with your spare cash? Note that your overall portfolio returns also includes your cash holdings. Holding large position in cash for long period of time may impact negatively on your long term returns.
(31-05-2013, 11:11 AM)Wildreamz Wrote: [ -> ]Buying into great businesses with good long term prospect is the key tenet of Warren Buffett's investing philosophy. However, he also notes that the entry price must be sensible, else it will take a long time for the intrinsic value of the business to catch up with the price paid.
At times when investments opportunities are not available, what would you do with your spare cash? Note that your overall portfolio returns also includes your cash holdings. Holding large position in cash for long period of time may impact negatively on your long term returns.
IMO, there are 2 alternatives available
(1) keep the spare cash, and continue to do the home work and waiting to put in the money...
or
(2) 100% vested, and recycle the invested capital to catch opportunities arises along the way.
Well, don't ask me which is better, because i am not sure. I am using (2) so far, and so good. There are buddies using (1) and doing as good if not better.
Let's borrow KopiKat's idea, chose one suitable, rather than the best. The absolute best might not even exist.
(31-05-2013, 11:49 AM)CityFarmer Wrote: [ -> ] (31-05-2013, 11:11 AM)Wildreamz Wrote: [ -> ]Buying into great businesses with good long term prospect is the key tenet of Warren Buffett's investing philosophy. However, he also notes that the entry price must be sensible, else it will take a long time for the intrinsic value of the business to catch up with the price paid.
At times when investments opportunities are not available, what would you do with your spare cash? Note that your overall portfolio returns also includes your cash holdings. Holding large position in cash for long period of time may impact negatively on your long term returns.
IMO, there are 2 alternatives available
(1) keep the spare cash, and continue to do the home work and waiting to put in the money...
or
(2) 100% vested, and recycle the invested capital to catch opportunities arises along the way.
Well, don't ask me which is better, because i am not sure. I am using (2) so far, and so good. There are buddies using (1) and doing as good if not better.
Let's borrow KopiKat's idea, chose one suitable, rather than the best. The absolute best might not even exist.
I choose to use (1) from the beginning. At times i do wonder whether (2) is better. Now i think if you have built up a large investing capital, (2) should be better. Provided of course you select dividend paying stocks even in the worst of time. And you can live on the dividends.
I am not really concern about the cash on hand. When market is on an uptrend, I tend to hold more cash as I will take profit along the way. Conversely, when market is down, my cash holding will be lower because I will use it to buy more shares. As long as the overall returns, in absolute amount and not as a % of total portfolio (cash + shares) are able to meet my target, I am happy. In this way, I am not pressure to invest hastily and unnecessarily when I have more cash and when prices are not compelling. On the other hand, I usually have some cash on hands to take opportunity of cheap prices. In fact I think I am a bit KS as I am holding more cash than necessary, but this method is suitable for me and serves me well so far.
There are reasons to buy and sell, amount of cash on hands is one of the considerations, but not a key one.
I be holding some cash at all times. The proportion will depend on the availability of investments. If can't find any, will not just buy anything.
this type of markets.. going by macro, world GDP is 3-4% growth estimated..
Buy counters which continues to generate decent dividends yields...
nothing major ever happens.. US/Japan continues to print $...
keep some cash for special counters.."regional plays"...etc... Myanmar plays... sector plays... etc.. SPH... etc..
It's just a mudding along kind of market now at the moment... don't it will change much till 2014 & beyond... :O
Personally I invest all investable capital in dividend paying stocks, should the need arise to buy stocks at crazy fire sale, I go into margin maximum 25% of my total stock value and sell when markets recover.
Risky? Perhaps.
Depend. Margined a stock that recovers after the blood-bath, you are gutsy. The other way round, sorry mate
(31-05-2013, 03:53 PM)kevlee Wrote: [ -> ]Personally I invest all investable capital in dividend paying stocks, should the need arise to buy stocks at crazy fire sale, I go into margin maximum 25% of my total stock value and sell when markets recover.
Risky? Perhaps.
Always remember the saying: "Markets can remain irrational longer than you can remain solvent". Thread with caution.
(31-05-2013, 11:11 AM)Wildreamz Wrote: [ -> ]At times when investments opportunities are not available, what would you do with your spare cash? Note that your overall portfolio returns also includes your cash holdings. Holding large position in cash for long period of time may impact negatively on your long term returns.
Hi Wilddreamz,
(1) All my cash have been used to buy 'call options'. I am not gaining anything from these options and in fact, i am paying for this options with my cash.
(2) The call options that i am buying, do not expire and allow me to buy the shares in the infinite future at a strike price that i decide.
(3) I am currently paying for these call options with the opportunity costs that i have lost (for not investing in dividend counters and other capital gains from potential investments) and also eaten away from inflation.
(4) I am TOTALLY fine with inflation corroding my portfolio slowly and surely, IF i am able to swing the big pitch when it comes.
P.S. Just sharing how Warren Buffett views his own cash holdings.