At a recent club meeting, the topic of what to do with
uninvested cash came up. In particular, members were
concerned that our uninvested cash was not earning anything
giving the current low interest rates.
Most of club's assets are indeed invested in stocks but we
often have between $1000 and $3000 dollars that is sitting
in our broker's money market core position.
So it was suggested that we park this spare cash in an S&P
ETF (VOO) and then sell some or all of ETF shares when we
are ready to invest in a particular stock.
Initially, we thought this was a good idea but are now
having second thoughts. In particular this approach would
potentially result in several buy and sell transactions for
the ETF. For example, in any given month, we might decide to
sell some of the ETF to purchase a stock and then buy some
shares as monthly member contributions come in.
We're wondering if this would result in accounting problems
or complications. Some of the problems sound similar to what
we might encounter if we did automatic dividend
re-investing. For example, If we buy and sell the ETF in the
same month, wash sales might be a concern.
Have any other clubs had experience doing this? What do
other clubs do with uninvested cash?
Thanks in advance for your help!
Len Delmolino
Massachusetts High Flyers Investment Club
John Munn on
Len...
Besides having a number of small transactions, you're adding a lot of effort for what may be $40 over the course of a year in income, assuming you'd receive about 2% average in dividends on an average amount of $1,500. My assumption is it takes 4 meetings to work up to $3000 when it's used to purchase stock. So the balance progression from month to month is 0, 1000, 2000, 3000, for an average monthly balance of $1,500. Assuming a 2% return yields $30/year in dividends (and this is assuming you own $3,000 in stock on the day before it goes x-dividend. So you're adding a lot of short term trades for the treasurer to deal with on the hopes of capturing $30 annually.
Further... stocks go up and down. Your club is assuming the ETF only increases in value. What if it goes down in the interim? In order to make your intended stock purchase you may have to sell the S&P ETF at a loss.
I think the effort, while well intentioned, is too much work for a hopeful but uncertain gain of maybe $30/year, assuming all goes well.
At a recent club meeting, the topic of what to do with
uninvested cash came up. In particular, members were
concerned that our uninvested cash was not earning anything
giving the current low interest rates.
Most of club's assets are indeed invested in stocks but we
often have between $1000 and $3000 dollars that is sitting
in our broker's money market core position.
So it was suggested that we park this spare cash in an S&P
ETF (VOO) and then sell some or all of ETF shares when we
are ready to invest in a particular stock.
Initially, we thought this was a good idea but are now
having second thoughts. In particular this approach would
potentially result in several buy and sell transactions for
the ETF. For example, in any given month, we might decide to
sell some of the ETF to purchase a stock and then buy some
shares as monthly member contributions come in.
We're wondering if this would result in accounting problems
or complications. Some of the problems sound similar to what
we might encounter if we did automatic dividend
re-investing. For example, If we buy and sell the ETF in the
same month, wash sales might be a concern.
Have any other clubs had experience doing this? What do
other clubs do with uninvested cash?
Thanks in advance for your help!
Len Delmolino
Massachusetts High Flyers Investment Club
Bob Mann on
Rarely any such thing in our club. We believe in always being invested in the market
Bob
> On 05/25/2021 2:10 PM Leonard J Delmolino via bivio.com <user*27879700001@bivio.com> wrote:
>
>
> At a recent club meeting, the topic of what to do with
> uninvested cash came up. In particular, members were
> concerned that our uninvested cash was not earning anything
> giving the current low interest rates.
>
> Most of club's assets are indeed invested in stocks but we
> often have between $1000 and $3000 dollars that is sitting
> in our broker's money market core position.
>
> So it was suggested that we park this spare cash in an S&P
> ETF (VOO) and then sell some or all of ETF shares when we
> are ready to invest in a particular stock.
>
> Initially, we thought this was a good idea but are now
> having second thoughts. In particular this approach would
> potentially result in several buy and sell transactions for
> the ETF. For example, in any given month, we might decide to
> sell some of the ETF to purchase a stock and then buy some
> shares as monthly member contributions come in.
>
> We're wondering if this would result in accounting problems
> or complications. Some of the problems sound similar to what
> we might encounter if we did automatic dividend
> re-investing. For example, If we buy and sell the ETF in the
> same month, wash sales might be a concern.
>
> Have any other clubs had experience doing this? What do
> other clubs do with uninvested cash?
>
> Thanks in advance for your help!
>
> Len Delmolino
> Massachusetts High Flyers Investment Club
Larry Reno on
I agree with Bob 100%. Cash setting in an investment club account is wasted effort!!
Good judgement comes from experience. Experience
comes from bad judgement--Mark Twain.
Stay positive....Test negative!!
-----Original Message-----
From: Bob Mann via bivio.com <user*12614800001@bivio.com>
To: club_cafe@bivio.com; Leonard J Delmolino via bivio.com <user*27879700001@bivio.com>
Sent: Tue, May 25, 2021 2:32 pm
Subject: Re: [club_cafe] Uninvested Cash
Rarely any such thing in our club. We believe in always being invested in the market
Bob
> On 05/25/2021 2:10 PM Leonard J Delmolino via bivio.com <user*27879700001@bivio.com> wrote: > > > At a recent club meeting, the topic of what to do with > uninvested cash came up. In particular, members were > concerned that our uninvested cash was not earning anything > giving the current low interest rates. > > Most of club's assets are indeed invested in stocks but we > often have between $1000 and $3000 dollars that is sitting > in our broker's money market core position. > > So it was suggested that we park this spare cash in an S&P > ETF (VOO) and then sell some or all of ETF shares when we > are ready to invest in a particular stock. > > Initially, we thought this was a good idea but are now > having second thoughts. In particular this approach would > potentially result in several buy and sell transactions for > the ETF. For example, in any given month, we might decide to > sell some of the ETF to purchase a stock and then buy some > shares as monthly member contributions come in. > > We're wondering if this would result in accounting problems > or complications. Some of the problems sound similar to what > we might encounter if we did automatic dividend > re-investing. For example, If we buy and sell the ETF in the > same month, wash sales might be a concern. > > Have any other clubs had experience doing this? What do > other clubs do with uninvested cash? > > Thanks in advance for your help! > > Len Delmolino > Massachusetts High Flyers Investment Club
Phillip Richards on
Our club has gone to cash for tactical reasons, but if we're 'in the market', we're using all our cash except for a small portion to pay fees or other expenses. Either way, the small amount of interest earned has not been a concern for us, or another way of putting it, the opportunity cost has not been too great; we have not gone to cash for too long periods of time. You might consider using something like MINT for a cash position; it's designed for 'preservation of capital.'
Phillip Richards (818) 321-6098
On Tuesday, May 25, 2021, 11:10:49 AM PDT, Leonard J Delmolino via bivio.com <user*27879700001@bivio.com> wrote:
At a recent club meeting, the topic of what to do with uninvested cash came up. In particular, members were concerned that our uninvested cash was not earning anything giving the current low interest rates.
Most of club's assets are indeed invested in stocks but we often have between $1000 and $3000 dollars that is sitting in our broker's money market core position.
So it was suggested that we park this spare cash in an S&P ETF (VOO) and then sell some or all of ETF shares when we are ready to invest in a particular stock.
Initially, we thought this was a good idea but are now having second thoughts. In particular this approach would potentially result in several buy and sell transactions for the ETF. For example, in any given month, we might decide to sell some of the ETF to purchase a stock and then buy some shares as monthly member contributions come in.
We're wondering if this would result in accounting problems or complications. Some of the problems sound similar to what we might encounter if we did automatic dividend re-investing. For example, If we buy and sell the ETF in the same month, wash sales might be a concern.
Have any other clubs had experience doing this? What do other clubs do with uninvested cash?
Thanks in advance for your help!
Len Delmolino Massachusetts High Flyers Investment Club
Laurie Frederiksen on
I helped a club work through issues with investing as you've described Len.
It was a mess. They had lot matchup problems and difficult wash sale transactions that took a long time to untangle, especially since they waited until the end of the year to address them all.
There can also be issues having to reclassify dividends and change dates on January dividends with ETF's that you will need to address manually each year when you get your 1099 before you can do your taxes.
Any minimal income the club I worked with earned from the investment was wiped out by Concierge time to untangle their problems.
It sounds like a good idea, but in practice, it is probably going to create more issues than it solves.
Probably better to just buy more shares in something with a decent dividend that you are going to hold for a while.
Laurie Frederiksen Invest with your friends! www.bivio.com
Our club has gone to cash for tactical reasons, but if we're 'in the market', we're using all our cash except for a small portion to pay fees or other expenses. Either way, the small amount of interest earned has not been a concern for us, or another way of putting it, the opportunity cost has not been too great; we have not gone to cash for too long periods of time. You might consider using something like MINT for a cash position; it's designed for 'preservation of capital.'
At a recent club meeting, the topic of what to do with uninvested cash came up. In particular, members were concerned that our uninvested cash was not earning anything giving the current low interest rates.
Most of club's assets are indeed invested in stocks but we often have between $1000 and $3000 dollars that is sitting in our broker's money market core position.
So it was suggested that we park this spare cash in an S&P ETF (VOO) and then sell some or all of ETF shares when we are ready to invest in a particular stock.
Initially, we thought this was a good idea but are now having second thoughts. In particular this approach would potentially result in several buy and sell transactions for the ETF. For example, in any given month, we might decide to sell some of the ETF to purchase a stock and then buy some shares as monthly member contributions come in.
We're wondering if this would result in accounting problems or complications. Some of the problems sound similar to what we might encounter if we did automatic dividend re-investing. For example, If we buy and sell the ETF in the same month, wash sales might be a concern.
Have any other clubs had experience doing this? What do other clubs do with uninvested cash?
Thanks in advance for your help!
Len Delmolino Massachusetts High Flyers Investment Club
Peter Dunkelberger on
The scariest thing to me about selling and buying when one needs to is that you end up buying high and selling low, wiping out any income from the ETF or worse, reducing your capital.
At a recent club meeting, the topic of what to do with
uninvested cash came up. In particular, members were
concerned that our uninvested cash was not earning anything
giving the current low interest rates.
Most of club's assets are indeed invested in stocks but we
often have between $1000 and $3000 dollars that is sitting
in our broker's money market core position.
So it was suggested that we park this spare cash in an S&P
ETF (VOO) and then sell some or all of ETF shares when we
are ready to invest in a particular stock.
Initially, we thought this was a good idea but are now
having second thoughts. In particular this approach would
potentially result in several buy and sell transactions for
the ETF. For example, in any given month, we might decide to
sell some of the ETF to purchase a stock and then buy some
shares as monthly member contributions come in.
We're wondering if this would result in accounting problems
or complications. Some of the problems sound similar to what
we might encounter if we did automatic dividend
re-investing. For example, If we buy and sell the ETF in the
same month, wash sales might be a concern.
Have any other clubs had experience doing this? What do
other clubs do with uninvested cash?
Thanks in advance for your help!
Len Delmolino
Massachusetts High Flyers Investment Club
Rohit Agarwal on
Love the good old reply-all!
Someone already gave the instructions for unsubscribing!
Our club has gone to cash for tactical reasons, but if we're 'in the market', we're using all our cash except for a small portion to pay fees or other expenses. Either way, the small amount of interest earned has not been a concern for us, or another way of putting it, the opportunity cost has not been too great; we have not gone to cash for too long periods of time. You might consider using something like MINT for a cash position; it's designed for 'preservation of capital.'
At a recent club meeting, the topic of what to do with uninvested cash came up. In particular, members were concerned that our uninvested cash was not earning anything giving the current low interest rates.
Most of club's assets are indeed invested in stocks but we often have between $1000 and $3000 dollars that is sitting in our broker's money market core position.
So it was suggested that we park this spare cash in an S&P ETF (VOO) and then sell some or all of ETF shares when we are ready to invest in a particular stock.
Initially, we thought this was a good idea but are now having second thoughts. In particular this approach would potentially result in several buy and sell transactions for the ETF. For example, in any given month, we might decide to sell some of the ETF to purchase a stock and then buy some shares as monthly member contributions come in.
We're wondering if this would result in accounting problems or complications. Some of the problems sound similar to what we might encounter if we did automatic dividend re-investing. For example, If we buy and sell the ETF in the same month, wash sales might be a concern.
Have any other clubs had experience doing this? What do other clubs do with uninvested cash?
Thanks in advance for your help!
Len Delmolino Massachusetts High Flyers Investment Club
Laurie Frederiksen on
They're gone. I guess some people don't read instructions.
Laurie Frederiksen Invest with your friends! www.bivio.com
Our club has gone to cash for tactical reasons, but if we're 'in the market', we're using all our cash except for a small portion to pay fees or other expenses. Either way, the small amount of interest earned has not been a concern for us, or another way of putting it, the opportunity cost has not been too great; we have not gone to cash for too long periods of time. You might consider using something like MINT for a cash position; it's designed for 'preservation of capital.'
At a recent club meeting, the topic of what to do with uninvested cash came up. In particular, members were concerned that our uninvested cash was not earning anything giving the current low interest rates.
Most of club's assets are indeed invested in stocks but we often have between $1000 and $3000 dollars that is sitting in our broker's money market core position.
So it was suggested that we park this spare cash in an S&P ETF (VOO) and then sell some or all of ETF shares when we are ready to invest in a particular stock.
Initially, we thought this was a good idea but are now having second thoughts. In particular this approach would potentially result in several buy and sell transactions for the ETF. For example, in any given month, we might decide to sell some of the ETF to purchase a stock and then buy some shares as monthly member contributions come in.
We're wondering if this would result in accounting problems or complications. Some of the problems sound similar to what we might encounter if we did automatic dividend re-investing. For example, If we buy and sell the ETF in the same month, wash sales might be a concern.
Have any other clubs had experience doing this? What do other clubs do with uninvested cash?
Thanks in advance for your help!
Len Delmolino Massachusetts High Flyers Investment Club
Leonard J Delmolino on
Thanks to everyone for your input on this topic! Very
helpful and much appreciated!
Len Delmolino
Massachusetts High Flyers Investment Club