The recent market crash reveals who has cash stuffed and stashed and who has been upgrading their lifestyle. We will see who has the possibility to take part in the long overdue black Friday sale of the stock exchange. If your money clip has been burning a hole in your suit, then now it’s time to look for coins between the leather seats in your Porsche.*

Just as there is a difference between trading and investing, there is a difference between saving and waiting in the wings.

Trading from hand to mouth and staying fully invested is very common. I bet you’ve heard that if you miss the 10 best trading days in a year, you will surely lose to the market. Another worn wisdom is that “time in the market beats timing the market”. Both statements basically tells you to invest immediately or periodically because you will not be able to sell at the peak or buy at the bottom.  This is probably true for the average person, but I bet you are not average. You are likely money savvy in the way your grandma was when she was clipping out coupons from the newspaper. She didn’t buy detergent monthly, she bought a year’s supply when it was on sale.

One of the most useful personal traits in trading is the ability to patiently sit on your money. The information flow is endless and the temptation to trade increases with your screen time. Unless you are day trading and cashing out each evening, it is very rare to find traders with a lot of cash reserves at their finger tips. After all, the capital is deployed to maximize profits, and the more money you can put to work, the more potential your upside has.

Setting a Cash Out Milestone

As long as you receive credit interest on your cash position, you might as well set portfolio valuation levels where you cash out a certain percentage of your stock holdings. Call it a Cash Out Milestone.

Personally, I always had the goal to beat the main indexes and make at least 15% every year. When I hit the 15% target, I either diversify or sell part of my equity holdings. I’ve also used in the past the “10 000 a month” milestone to simply cash out for the month once the quota is reached.

One way to force you to have cash on the sidelines is to place low ball orders on companies that you believe in.  The pending orders will hold your cash ransom and who knows, maybe there is a sudden newsflash or glitch and one of your low ball offer is picked up while you’re on vacation.

Another way is to use the monthly investment functionality available on most trading platforms. You set aside a cash amount in the beginning of the year for this purpose and forget about it.. until the rainy day.

By using the above techniques you will be less tempted to go all-in every other day.

We should not underestimate the difficulty of not-investing, especially if you actively follow financial news and trade daily. Just as there are shopaholics, there are tradeaholics. As an independent investment firm or independent individual you can, contrary to all other institutions in the world, be all in cash at any point in time. This is a privilege and a competitive edge that very few have the balls to utilize. Just too bad that the current market crash had to happen in order for me to remind you about it. My bad.

*Perhaps I’m assuming too much:

1. You don’t wear a suit because no one taught you that it displays the appreciation you have for the company you keep.
2. You don’t have a money clip because you are yet to discover the positive psychological effects of the human touch.