Last night, I had a moment. Another one of those, "oh crap, what am I doing?" moments. This is what spurred it...at the end of every month, I take a look at my balances for my savings account, Roth IRA, and regular brokerage account. I then update the amounts in a spreadsheet I've called "Savings Plan." In reviewing my balances, I looked at the asset allocation of my Roth and brokerage account, and much like it has been for the past umpteen months, a considerable amount has been sitting useless as cash. I call it a "considerable amount" because the amounts I had in cash were close to the amount I've indicated to be "automatically invested," at least for the Roth....the regular account had zero cash.
To help you better understand what the heck I am talking about, I should share that I invest using the discount brokerage Sharebuilder (for both the Roth and regular brokerage account). I currently use an automatic investing plan for both accounts, whereby when certain dollar amount is available in cash, Sharebuilder will invest that certain amount in the securities that I have indicated.
Side note: these securities include a small cap exchange traded fund (ETF), IJT, and a handful of my favorite companies: Johnson & Jonhson, Walmart, McDonalds, Pepsico, Honda, and Microsoft. Each time I purchase these securities, I pay $4 for each trade (i.e. $4 per company).
Anyways, the "certain amount" I planned to automatically invest was $229 for the regular brokerage account (which holds one security, the index fund) and $1374 for the Roth (which holds the aforementioned six stocks; you'll notice that $1374 = 6 times $229). Why $229? Like I said before, there's a $4 fee for each trade; with that accounted for, I invest $225 in the respective securities. I wanted to be mindful of keeping my investment fees low, so my $4 fee for every $225 invested means I pay 1.7% in fees to invest. Make sense?
Well, last night I moved some money. I transferred $230 to the regular account from my emergency savings account (the savings account balance is now around $950). And I changed the automatic investment amount from $1374 to $1080 (I have $1084 in cash, about $290 short of the pre-set amount; this breaks down to $176 per stock plus $4 each to trade). I decided not to transfer any additional funds from the savings account to reach the $1374 because: 1) I am planning to use some of those funds in the next three months and 2) I don't want to be up a creek without a paddle in the event I need to access some cold hard cash. And yes, I realize that by changing the actual investment amount from $225 to $176 that I will pay about 2.3% in fees. Don't get your panties in a bunch, I'll reset it to $225 after this trade goes through. Besides, I am a bit consoled by the fact that some people pay much more in fees to trade..like those folks who are into active trading (for my account, that would be $9.95 a pop. Yikes!)
Overall, why did I make these changes? Because my accounts have been performing well and I haven't been using the cash in them. It's kind of like the lottery (which I don't play) you gotta play to win and frankly, my money isn't working for me as cash.
Would you have done the same thing?
Or would you do things differently? If so, how and why?
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