Short term investing is the worst.

About two months ago, I took $14,000 out of our savings account and put it in a taxable investment account. To date, it’s probably been my least favorite financial move I’ve ever made.

In fact, it’s the worst.

It’s also, apparently, the responsible thing to do, but that’s besides the point.

 

Responsibility is totally overrated.

drink and drive

To be clear it’s not the investment that I picked that sucks. The interest I’m earning in my Vanguard fund is blowing my savings account out of the water, granted that’s not saying much when my savings APY is a measly 0.7%.

As great as having my money make more money is, I just can’t shake the uneasy feeling I’ve had. I hate feeling less liquid.

I loved having fat stacks of cash in the bank. 

Around this time last year Girl Ninja and I had $100,000 in our savings account. After putting $70,000 of that towards a down payment, and $14,000 in to our taxable account, we are left with about $15,000 in our savings account now.

There is no logical reason why I would need to keep more than that in our savings account. I should be patting myself on the back for diversifying our money across retirement accounts, real estate, and now short-term investments, but instead I want to crawl in to bed and start sucking my thumb.

Investing in our taxable account is certainly the most uncomfortable thing I’ve done in regards to managing our money. I just need to keep reminding myself to stay the course. No pain, no gain right?

What is “that responsible personal finance thing” you know you should be (or currently are doing) that makes you uncomfortable? 

21 thoughts on “Short term investing is the worst.

  1. I have some passive and some part-time income. My part time job fluctuates. I tallied up my expenses till the end of the year and I subtracted my passive income from that amount. I put a good chunk of money to cover the rest of the expenses in my savings account. In other words, if I cannot bring any income till the end of the year, I am still good.

    I am investing a good deal of money in my retirement account. I have some savings in USD, gold and Turkish Stock Exchange but not much.

    All in all, I am doing the responsible thing but, I am still uncomfortable due to feeling that my savings account is not fat enough. I do not have a “number” in my mind that would put me at ease but, what I have doesn’t feel enough.

  2. “There is no logical reason why I would need to keep more than that in our savings account.”

    Do you believe this? If so (which I do too), why does not having more than this make you feel bad? I guess the “logical” is key… 🙂

    I’m quite the opposite: it makes me feel terrible having too much money not earning good returns…

  3. We recently lowered our cash savings as well. It made us uneasy at first but now I’m really glad we did. We took a portion that cash to make an extra payment on our student loans. Wasn’t fun but it moved us a little bit closer to our payoff freedom.

  4. My question to you is: Can you live for at least six months – all bills, exactly the way you are living now, with the 15K you have in savings? Ignore everything else. Just that. If you can’t, that may be where you are getting your unesay feeling. You know you can pull that money from the investments, just — not quickly and not without penalty.

    • “not without penalty”

      I don’t know why you’re saying this. This is a taxable account funded with after-tax money; therefore there are no penalties as with early withdrawals from tax-deferred accounts.

  5. I think $15,000 is too little to have in savings and would make me feel uncomfortable too, especially with an impending baby and job loss. I would have kept the $17,000 in the account, at least until the baby came. I would say at least $30,000 in cash at all times and then invest anything above that. It’s not a given if there were a market downturn that you could get the money you paid into your house back for emergency use. I would be sure to have at least enough to cover 1 year of expenses. Retirement investment is important, but so is the feeling of freedom in hard times.

  6. “There is no logical reason why I would need to keep more than that in our savings account. I should be patting myself on the back for diversifying our money across retirement accounts, real estate, and now short-term investments.”

    Stop right there.

    “but instead I want to crawl in to bed and start sucking my thumb.”

    Yes, but that may not be related to the above.

    “I hate feeling less liquid.”

    But you really aren’t significantly less liquid. Investments are not as illiquid as a house. If you really need more cash at any point, you can always sell from your investments, pay the more favorable capital gains tax, or take advantage of deducting any losses. You just shouldn’t sell investments you’ve had for less than a year and a day, because short-term capital gains are taxed at ordinary income rates.

    • On top of that I know that you have credit cards and home equity that can be tapped. Not the best things to use but there if you need it.

    • You’re right. I’m not any less liquid, and that’s exactly why it’s illogical to have this stress I do. Hopefully it will subside in time 🙂

  7. Don’t feel bad at all. You can laugh at my fear of investing because I have 40k in a Roth IRA sitting in cash because I don’t know what to buy with it. It has been like that for YEARS…

  8. If you feel so bad about it are you sure you would be able to keep the money where it’s located if the market took a dive? You may want to reconsider.

  9. Eh, it will work out. We hover around 20 -25 in savings to feel comfortable.

    To answer your question, owning so much of my company’s stock as a percentage of my overall investments is probably what makes me less comfortable. My 401ks matched in it. 20% of my salary goes into it for a stock purchase plan, etc.

    Just worried about an enron-esque collapse.

  10. I’m with Money Stepper. I hate having money not earning me more money. Having said that, I hate that I had to dip into my cash emergency due to low earnings from my husband who has variable income. But to answer your question, what makes me uncomfortable is sorting through my various retirement investment statements because it’s boring, but I should be attacking the piles.

  11. I started investing in taxable accounts last October. Every month, I add a few hundred $$ to my Schwab index fund account.

    I too feel a little uncomfortable due to the recent wild market fluctuation. My index fund declined 7.33% from 03/04-04/11, so you can see how disappointing it has been. The good news is that I have no immediate use for that money, so there will be plenty of time for recovery, dividends, etc.

    Hopefully now that tax season(stock selloffs) is over for most people, the market stabilizes with an upward growth trend.

  12. We went through a similar cash drop last year when we bought a duplex with 20% down & paid $20k in grad school expenses. All of a sudden the savings/checking account looked pathetically low. You get accustomed to it eventually.

  13. I purchased Whole Life Insurance instead of term. I could get more dollars of death benefit in term, but i viewed it the same way as I few renting, I’d rather have some equity and be able to borrow from myself if needed. My Rate of return with dividends is likely to be about 4.5% though, so i miss out on the market.

  14. It has to be what I’m doing right now: saving to buy an income producing asset, specifically a rental property.

    I’m 17-years-old and it’s exciting, yet painful to watch my savings account approach $10,000. When it gets high enough I will use to money to buy a foreclosure in Philadelphia. I’ll be in the city for college.

    (I know I should be sad to see people default on mortgages and have their homes sold for pennies on the dollar but it’s great for wanna-be investors like me who like the idea of multiple income streams.)

    My goal is to increase my earning potential which is a pretty sexy thing to think about. But even though I’ll make my principal investment back in just a few years, it’s hard to know all the fruits of my labor will be spent…ahem…invested and I won’t have it in the bank much like your situation.

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