I'm not sure this makes too much sense but bear with me....
I was speaking to a friend the other day about investing and money. He makes good money, is able to save, and last year bought a nice PPOR with his wife, but no other investments. He said he was speaking to a few of his friends earlier, and they raised the question 'how much money do you need to retire?' The answers varied, but the point is that they were talking about how much CASH they needed to retire. I don't know whether his friends have investments or not.
I said, you know, I don't think like that. As an investor, I have cash either because I sold some stuff because I thought it was overvalued, or I have specific plans for it (e.g. now I'm putting together cash as a deposit for my PPOR). I would think more along the lines of what cashflow I want to generate and what asset mix I would be comfortable with in terms of gearing and risk. I really can't imagine a time when I would ever be 100% long cash and just earn interest income (spectre of inflation in the background).
Yet my friend kept saying it was only a hypothetical, but I said such a weird goal will probably skew your path and plans to get there. I mean, how do you make a plan for having, say, $5m cash?
Is this something people have observed in non-investors (that is, they focus far too much on 'cash' and not 'assets')? It's slightly different from the net worth v cashflow thing.
Alex
I was speaking to a friend the other day about investing and money. He makes good money, is able to save, and last year bought a nice PPOR with his wife, but no other investments. He said he was speaking to a few of his friends earlier, and they raised the question 'how much money do you need to retire?' The answers varied, but the point is that they were talking about how much CASH they needed to retire. I don't know whether his friends have investments or not.
I said, you know, I don't think like that. As an investor, I have cash either because I sold some stuff because I thought it was overvalued, or I have specific plans for it (e.g. now I'm putting together cash as a deposit for my PPOR). I would think more along the lines of what cashflow I want to generate and what asset mix I would be comfortable with in terms of gearing and risk. I really can't imagine a time when I would ever be 100% long cash and just earn interest income (spectre of inflation in the background).
Yet my friend kept saying it was only a hypothetical, but I said such a weird goal will probably skew your path and plans to get there. I mean, how do you make a plan for having, say, $5m cash?
Is this something people have observed in non-investors (that is, they focus far too much on 'cash' and not 'assets')? It's slightly different from the net worth v cashflow thing.
Alex