Nothing is unlimited, I suppose.
Cash
In the possibility I have cash on hand, I have choices. Keeping some cash in my checking account is appropriate,as expenses to be paid are seemingly endless. And I have a linked money market account at the same bank. But too much cash is wasteful, as both accounts’ interest is abysmally small.
So transferring extra cash to a high yield saving account is the way to go.
Another Account
As mentioned in The Mechanics of Money (Part 3): How I Invest, I have another checking-type account at another bank. I use this account as my “investing account.” When I transfer funds to a broker, I use this account as the source of funds. If I receive dividends directly, this is the account dividends get deposited into. If I have dollar-cost-averaging, this investing account is where the finds get withdrawn from.
Why do I have such an investing account?
I wanted to keep my paying bills account separate from my investing activities. Easy to do if I have two accounts. This account does have a buffer of some extra cash in it.
At A Broker
The main purpose of having an account at a broker is to be able to buy and sell stocks, bonds, and so on. While most of the balance in the account is invested in stocks and some CDs, I do keep some cash in the account. This is so I can take advantage if a stock comes into my buying target range.
The Trigger is Pulled
As I check on prices daily, once in a while I notice a stock bouncing near my buying target. When this happens, I sometimes set a limit order with my broker to buy if the price on that stocks drops to my target price. This allows my to sit back and wait for it to happen.
Other the other hand, sometimes my limit order will not be triggered if the price never gets down to my target level. That can happen too. Should I wait, or pull the trigger and buy at a slightly higher price, or should I give up? Not a real question, as I will let it go or buy.
Comments? Let me know here.
The illustration of the cactus is from “Iconographie descriptive des cactées, ou, Essais systématiques et raisonnés sur l’histoire naturelle, la classification et la culture des plantes de cette famille” by French botanist Charles Lemaire, published in 1841. Courtesy Missouri Botanical Garden.
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