One thing that I have learned over the years is the importance of having at least a small amount of cash available to invest for those moments where an opportunity presents itself. To be able to “buy low and sell high” you have to actually be able to buy when things are low and the best deals are when there is a major market move to the downside. The major market drop at the beginning of the COVID pandemic back in March 2020 was a great opportunity to pick up stocks really cheap. The subsequent rebound has been tremendous and very lucrative if you were able to take advantage of that market opportunity. However, there are a couple of things to remember when building up an investment cash reserve.
First, this is not your emergency fund. Your emergency fund is for emergencies. Don’t be dumb and tap into those funds for invest purposes. Investment money is separate and a lower priority than your emergency reserves.
Second, be patient if it takes awhile to build up these funds. Especially early on there will be so many things that you want to use that money to invest with in order to create positions but if you can slowly build a reserve of cash it will pay off later when you get those dramatic market moves.
Third, there are several ideas on how much cash you should keep on the side. Come up with your own goal. I stick to an actual amount versus a percentage because as your portfolio grows a percentage becomes a much bigger amount which may sideline too much money.
Finally, when you see your opportunity to buy that stock you have been following or the market moves dramatically and you can buy several things, do it. Bad news is the time to buy if you are able. Those are the times the best deals will be found. But you have to be ready for them by having a bit of cash available to make that move.
Then the process starts all over again.
Patient and Disciplined Saving 