Daily Archives: March 12, 2012

2012 Portfolio Re-balance Part 2: Forgetting about Cash

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One of my February goals was to re-balance my portfolio.  If you haven’t read Part 1, you can catch up here.

Re-balancing my Portfolio – Take 1

I was really happy with myself after this re-balance and I was ready to make the transfers, after March 1st, since I wasn’t sure if moving out my funds would affect my contributions for my 2011 taxes.  I was happily chatting away with BF, feeling pretty darn good about myself and my re-balances portfolio until…

What about Cash??

BF pointed (in the kindest and most gentlest way), that I hadn’t taken into account cash in my portfolio. Since I kept a sizable amount of cash on-hand, I realized that by not counting my cash, my portfolio was actually a lot more conservative than it seemed.

I decided not to include my Emergency Fund Savings ($10,000) and my Travel Fund ($1,200) since I wanted to keep that cash on hand for anything that comes up.  I am also debating about what to do with my General Savings Fund ($15,000) – for now, I have left it out of my portfolio calculation.

Re-balance – Take 2

I calculated my actual asset allocation, including my cash. Sure enough, it was a lot more conservative than I had wanted it to be.  From the chart above, I actually have 50% of my portfolio in cash and bonds.  Waaay too conservative for my liking.

So, I tweaked my asset allocation to be 30% of bonds & cash, and 70% stocks.  Now, it looks a lot better.


This was a great exercise and a huge wake-up call that money sitting in my checking account is idle money that could otherwise be earning interest, or could be invested in something.  It was also a great reminder that I need to continuously tally up my $0 budget at the end of the month and put the “extra” money (if any) into something – TFSA or Travel Fund, or whatever, so that I know my money is working for me.

Readers, how much cash do you like to keep in your portfolio?  Do you account for cash as part of your portfolio?



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