Carole,

From a different perspective...

My club "grew up" in NAICland where we were taught to keep every dime invested at all times. After the recession caught us with our perverbial pants down, we recognized the importance of cash, as a whole. George Nicolson, the founder of NAIC/Better Investing, wrote in the 1984 Investment Club Manual, the following:

We've had a sizeable upturn in the market this past few months, and having cash on hand has allowed us to take advantage of good quality stocks that were on sale. Our economy has not yet recovered, and with global financial issues looming and our own unemployment and housing issues still unresolved, the market has not stabilized. Look how many huge corporations are still stashing cash! Our club has been utilizing stop loss orders on those we hold long, and we've been using our side cash to secure put options - which allows us to make great income as we try to pick up stock at discounted prices.

I now believe that having a reasonable amount of cash on the sidelines in the club (or our personal portfolios, for that matter) is akin to having a 4-6 month stash of cash for emergency purposes in our lives. I don't think 12% is a bad number at all.

Lynn Ostrem

Crow River Investment Club

> George Nicolson, the founder of NAIC/Better Investing, wrote in the 1984 Investment Club Manual, the following:

> " ... at the time that a downward adjustment in stock prices occurs,

 

 

 

Thanks for the clarification, Jim.

Further, let me say that ANY percentage of cash in a club should be there by design, not accident. Nor should it sit there because no one is taking the time to study new stocks. But I am not opposed to my club stashing cash over a several month period if it means we are biding our time, waiting for what we want. This is another area where a cookie cutter, hard and fast rule does not apply.

Lynn O.

Good point, John.

For my group, we have several stocks we are intersted in...provided we can get the prices we desire. We have 5 members contributing $50 per month, totaling $250 in monthly dues. In February, we sold one covered call on a stock we own, and we used our cash supply to secure puts on 2 stocks we would like to own. That cash netted us an immediate $411, or 4.31% for the month. That's a comparative annualized return of over 50%. Our puts expired this month, so we did not get the stocks on which we sold those puts. Oh darn. We get to keep the money and try again this month! Not a bad problem to have. Eventually we will get stocks put to us, and when we do, they will be at a very good price. Point being: Our cash is far from dead money. In fact, we're making better returns on our conservative options than we are on capital gains.

Have a great week!

Lynn O.

On Mon, Mar 26, 2012 at 9:15 PM, Lynn Ostrem wrote:

Good point, John.

For my group, we have several stocks we are intersted in...provided we can get the prices we desire. We have 5 members contributing $50 per month, totaling $250 in monthly dues. In February, we sold one covered call on a stock we own, and we used our cash supply to secure puts on 2 stocks we would like to own. That cash netted us an immediate $411, or 4.31% for the month. That's a comparative annualized return of over 50%. Our puts expired this month, so we did not get the stocks on which we sold those puts. Oh darn. We get to keep the money and try again this month! Not a bad problem to have. Eventually we will get stocks put to us, and when we do, they will be at a very good price. Point being: Our cash is far from dead money. In fact, we're making better returns on our conservative options than we are on capital gains.

Have a great week!

Lynn O.