The market crashed in 2008 and all of sudden everything was available at dirt cheap. Most of the investable amount available in the market disappeared. Everyone who was fully invested lost an opportunity to invest which could have given them multifold returns. Now when the market drops neither the existing position can be exited at a negative rate of return and all sources of cash also dry up during that time.
It does not make difference if you are in positive or negative in a Bull market. How you react during the market crash is more important. And once in a while market does something so stupid that it takes your breath away.
This is one area where many people fail.
In short term, the people who deploy entire money may do good. But people with cash in hand do wonders.
You might argue with me saying the market does not crash every day but believe me you get an opportunity every day.
I really liked the quote which I found on the website http://www.economicsdiscussion.net
Money is anything serving as a medium of exchange. Most definitions of money take ‘functions of money’ as their starting point. ‘Money is that which money does.’ According to Prof. Walker, ‘Money is as money does.’
EARNING FROM IDLE CASH
This is very interesting “Money is as money does” this can be very easily interpreted as money is what money can do and it can’t be replicated with anything else even today. Even in the modern world of advanced financial instruments, there is no replication of money.
It is easy to find 100 ways to put your idle cash to use but no one can give you a single way to replicate idle cash.
Every portfolio option traders we recommend them that the best practice is to enter the in the market in a staggered manner. Do not assume that we are asking the trader to do averaging we are not talking about averaging. But a planned phased placing of option strategies has its own benefits. Don’t get us wrong we are not telling you to sell all your stocks and keep all the cash idle that’s not what we want. What we are looking for is to keep enough cash so that we are ready to put in future use and when a real opportunity arises we don’t miss the same.
You would be astounded at the way some of the world’s renowned investor keep loading the cash. It might sound very easy but its practically difficult to follow.
Charlie Munger once said, “It takes a character to sit there with all that cash and do nothing. But I didn’t get where I am by going after mediocre opportunities.”
This was often referred to Investment world but largely it stands true to even high-value option portfolio option trading.
The Indian stock market watchdog has raised alarm about brokers misusing the idle funds lying with the brokers trading account and has asked to return the unused cash quarterly or monthly back to the clients. The Securities and Exchange Board of India (Sebi) has also asked complete compliance from broking members and brokers, in turn, have attached the bank account of the account holder electronically for all the idle cash kept by the broker would be electronically transferred to their attached bank account.
Now, this is not a worry there many productive ways to manage your idle cash effectively also earn from this. There are many secured and risky ways to earn an income from idle cash put them to use when the opportunity arises. Based on the risk taken from low to high the returns would vary from high to low respectively.
When it comes to Having Idle Cash there is no Alternative.
Stock Trading starts with You. It is important to remember that there are no easy ways to keep a lot of idle cash all the time. If you have experienced a single market crash then you would definitely understand.
If you know any other way to maintain Idle cash and generate income from that that I didn’t mention here, please share it with us in the comments section.
Like this post? Don’t forget to share it!