Long story, I am considering moving my trading to Interactive Brokers
To avoid an inactivity fee, I need to retain a certain equity balance or trade frequently. I dont think I can meet that balance with my trading balance alone and I am considering topping it up with my cash reserve
I realise the inactivity fee is a small cost and not a reason to change an investment strategy (if I even had one to start with!)
I was considering swapping my cash reserve for a bond reserve. The trading fees are minimal, so I think I can sell off bonds as cash is needed
What could be the pros and cons of this approach?
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Cash vs Bonds as reserve
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- Lemon Slice
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Re: Cash vs Bonds as reserve
Speaking from personal experience, the advantage of keeping in cash is that mentally it's much easier to commit that cash to a share purchase. Having some money in bonds to realease as cash is a 2-step mental process.
I put approx 4% of my SIPP portfolio into ERNS several years ago (it had been in cash), with the intention of releasing it as required as part of the yearly rebalancing I intended to do, or to release all of it when shares were cheap in some kind of market sell off. So far I've released none of it, and am using dividend cash coming in to rebalance. So that 2-step process is acting as a mental brake. That's not necessarily a bad thing (theory being bonds reduce volatility), but it's not what I had intended to do.
torata
I put approx 4% of my SIPP portfolio into ERNS several years ago (it had been in cash), with the intention of releasing it as required as part of the yearly rebalancing I intended to do, or to release all of it when shares were cheap in some kind of market sell off. So far I've released none of it, and am using dividend cash coming in to rebalance. So that 2-step process is acting as a mental brake. That's not necessarily a bad thing (theory being bonds reduce volatility), but it's not what I had intended to do.
torata
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