I was just after any insights as to how the whole concept of keeping cash reserves works in a trading or investing plan. I am more of an investor interested in long term growth and steady dividends. I have read a lot of information that says you should have 10, 15, 20% of your capital in cash in case of a drop in the market which presents excellent buying opportunites like the one we have just seen. I cant really see how I can do this without a large cash flow. I have a home loan, investment loan and my fortnightly pay is pretty much gone servicing these as well as bills groceries and the odd night out The problems i see with it in practical terms are:
1) I want my money working its hardest at all times. Even though i can put this cash into my redra home loan account and save 7.5% on it that option still isnt that appealing to me.
2) Suppose you did have 20% of your capital as cash and then a buying opportunity did present. Once you purchase stocks your cash reserve is effectively gone and without cash flow how do you get it back?
Seems to me to be difficult on an average wage to view keeping cash reserves as feasible however it really hurt not having funds avalable over the last couple of weeks to snap up some bargains.