Investing in the stock market can be fun. It can make you feel “grown up” by doing something everyone and their grandparents will tell you you should do as soon as possible. It may even get to the point where you continue investing until you are all out of “ammunition” as some call it. There are a couple of reasons why you should always have money on the sidelines waiting to be called into the field. I will go over the reasons why you should always have dry powder.
It Makes Sense
Why would you not just have money on the side? Emergencies can come out of nowhere that can easily demand few hundred dollars to a few thousand dollars. The last thing you need is to worry about being tight on cash. There is also general spending on a day-to-day basis that will require you to pay monthly bills on credit cards, utility and mortgage/rent.
There Will Be Opportunities
Even when the stock market is doing amazing; you can close your eyes and point to any stock, and it would go up the next day. However, news always comes around to hamper a stock and bring down the price. This is many times true when there is a stock market crash or even just a correction.
Opportunities come when a stock or the general market takes a dip and you “buy the dip”. We just had our first recent true pullback for the first time in a while. It feels amazing when you have cash to jump on a large pullback on your favorite stocks. The worst feeling that I have experienced is going through a stock market pullback and not having cash to take advantage of the opportunity.
There will be other investments aside from stocks that will come up such as real estate or emergencies that will require you to have liquid cash. Regardless, there will always be opportunities and other events that will require cash on hand, and in my opinion, is always good to have just to have it. In the event that you will need cash, you will be glad you have it. But until next time…
Thank you for letting us be a part of your Break Time.