As from April 2013 my Journey in Investing is to create Retirement Income for Life till 80 years old for two over market cycles of Bull and Bear.

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This blog is authored by an old multi-bagger blue chips stock picker uncle from HDB heartland!

"The market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth." - Dr. Alexander Elder

"For the things we have to learn before we can do them, we learn by doing them." - Aristotle

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Monday, 26 December 2016

Cash: A Call Option With No Expiration Date???

Golden Rabbit  26 December 2016 at 08:29:00 GMT+8

Can we look at cash rotting in the bank as a "separate" asset investment from stock portfolio?

Cash: A Call Option With No Expiration Date.


Hmm ....

For those with earned income; cash as a call option with no expiration will not have any significant impact even over prolong market cycle; but for those retirees like Uncle8888 who is depending on his portfolio and net worth's asset to generate cash flow to support his household expenses is a different story.

Retirees' cash as call option must have expiry date near the bottom of Bear or beginning of Bull; otherwise this call option without expiry over market cycles will eventually cause him to draw down on his net worth's assets to meet household expenses. 

Once into aggressive asset down; his sustainable retirement income for life will be doom!

For retirees; it is not just about opportunity cost with cash as call option; it is serious concern on sustainability and survival. 

Don't play, play with call options!



3 comments:

  1. CW,

    Hokkiens says, "Smart can oredi; no need to act smart".

    Sometimes we over complicate things.


    If we can earn and save $50K per year, we don't need any portfolio returns just as long we don't LOSE money.

    In 10 years we'll have $500K, and in 20 years we'll have a million! Can earn and save $100K annually even better!

    It will look good no matter we calculate with simple or compounding returns ;)

    And probably beat most dividend or low cost passive indexing strategies out there? Shhh...



    I am embarrassed for some of those readers who confuse the annual cash injections into a portfolio as "portfolio performance"... They go, "Wow! Your portfolio has grown so much when STI is basically flat for 2016. Impressive!"

    Face palm.

    They are probably more suitable for technical analysis - stick with pictures and drawings.



    ReplyDelete
    Replies
    1. More need to lim kopi with veterans on the ground if they can't learn from parents or relatives to know the real stuff and how to verify. LOL!

      Delete
  2. Ha! Ha!
    Now some people may know or understand why i use "VirtualBanking" with unlimited virtual fund with zero interest rate for stock portfolio.
    If life can be lived much more simpler why not?
    Or it is too simple for your liking?
    i always look for the simple things in life.
    It's always can allow you to sleep well at night.

    ReplyDelete

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