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You're exactly the kind of person this article is pointing out, because your ability to be wiped away by the market is a precarious position to be in.

by Laaw 11y ago

HLRoku 11y ago
I don't really follow how having money in stocks, bonds and a house is somehow capable of being wiped away by the market when a savings account in a bank wouldn't be in dire straits with such an economic upheaval to render those 3 investments useless
- Laaw 11y ago
  I'm sorry you don't follow, but it should be fairly obvious that stocks can crash, bond markets can collapse, and home prices can plummet, whereas money in FDIC insured savings accounts would only be lost in the event of a catastrophic, country-jeopardizing event, in which case we'll all have bigger problems. I'm not meaning to attack anyone personally, I just think this survey is trying to suss out what percentage of Americans are in a position such that an economic downturn would hurt them severely. I also don't know much at all about finances, so take what I'm saying with a jar of salt.
  - morgante 11y ago
    Not even the worst stock crash in history was a 99% drop. Also, you are almost 100% wrong about the intention of the article. It's not that they're trying to make some point about people's poor asset allocation, it's just sloppy reporting. If their actual point was that people had too much money invested, wouldn't the most obvious and actionable advice for the "What to Do If Your Savings Fall Short" section be to sell some shares and transfer the cash into a savings account? It's on you to prove why your financially unwise viewpoint is correct.
    - Laaw 11y ago
      The attitude you're bringing to this conversation makes me entirely unwilling to continue. Sorry.
      - morgante 11y ago
        I think you're the one who might need an attitude adjustment. Instead of providing reasoning for why cash is necessary, you continue to belittle people who invest their assets.
beambot 11y ago
What? Let's assume he's intelligent and has good diversification (eg. he mentioned bonds, stocks, home, and cash -- probably in a investment account). If all his financial positions got "wiped out" in a broad-sweeping financial collapse, then "cash in savings" would be equally worthless. In the meantime, he has a home to live in. Plus, most investment accounts give you easy access for withdrawals (eg. debit cards) or the ability to borrow while transfers or sales settle. I fail to see how it's precarious.
- Laaw 11y ago
  You're the second person to say this, but how would "cash in savings" be equally worthless? Maybe I'm not understanding, but it's pretty difficult to actually lose money in a savings account, that's the whole point.
  - scott_karana 11y ago
    > in a broad-sweeping financial collapse, then "cash in savings" would be equally worthless. > how would "cash in savings" be equally worthless? Maybe I'm not understanding, but it's pretty difficult to actually lose money in a savings account, that's the whole point. The cash wouldn't be lost, but it would have reduced purchasing power in a recession. And if inflation is steep, you're actively "losing" money. It would be "worthless" in the context of long-term investing, because nothing would have long-term worth.
    - antientropic 11y ago
      Why would the cash have reduced purchasing power in a recession? Sure, that would be the case if there was high inflation, but that certainly wasn't the case with the 2008 crisis.
    - mywittyname 11y ago
      You have that backwards, during a recession Cash is King. $10,000 in summer 2009 bought you a hell of a lot more of practically anything than the same amount a year previously. People with cash on hand in 2009 made out like bandits. Cheap stocks, cheap houses, cheap cars. Everything was cheap, cheap, cheap.
runako 11y ago
I think you're implicitly doing an asset allocation for the poster. > Cash on hand or it's invested in stocks, bonds and my home. That could be $100k on hand in checking, $600k in stocks/bonds, and $200k in home equity, with $0 in a savings account. Asset allocations that don't use savings accounts are not necessarily 'precarious'. Also, it's worth noting that most financial advisors do not recommend that you keep a significant portion of your assets in savings accounts. Primary reason is that by not being in assets that deliver returns, you are losing money to inflation, even at these low levels of inflation. (Also, you have to save a ton more if you don't let your money multiply.)
- Laaw 11y ago
  You are, as far as I know, entirely correct. I still think the survey was designed specifically to find these people who exist in this manner, and I think your criticisms are valid when placed against the thrust of the survey.
- misiti3780 11y ago
  everytime someone says that, I always think of a great quote by Nouriel Roubini: "asked whether he invests in stocks, he replied, "Not as much these days. I used to have a lot in equities—about 75%—but over the past three years, I’ve had about 95% in cash and 5% in equities. You’re not getting much from savings these days but earning 0% is better than losing 50%." [1] https://en.wikipedia.org/wiki/Nouriel_Roubini https://en.wikipedia.org/wiki/Nouriel_Roubini
  - enoch_r 11y ago
    Since June 2009, when that interview was conducted, the S&P500 has more than doubled, not including dividends, so I hope he switched back or he did, in a sense, "lose" 50%.
    - 6stringmerc 11y ago
      Counter point: Numerous financial experts assert the current valuations within the stock market do not reflect the underlying fundamentals; or, in other words, ZIRP allows for cheap debt in the bond markets which many firms are using to aggressively buy back stock, thereby artificially inflating the market value. Thus, "a correction" is due and his statement is still valid from a conservative investing standpoint.
Symmetry 11y ago
If the stock market falls by even just 80%, which is probably the minimum I'd call "wiped out" then things are bad enough that your savings account can't be trusted either.
- jzig 11y ago
  I strongly disagree with you and believe FDIC insured accounts can be trusted beyond a market fall of just 80%.
  - UK-AL 11y ago
    Market fall of 80% in a portfolio that has been diversified isn't that bad. Say you 50% in shares. It has lost 80% of that 50%. That's not so bad. You still have a chunk of savings. If goverment bonds loose all their value, it means goverments are close to failing. If real estate is loosing all its value. It means people have no money to buy houses If all 3 is going on the same time, some serious stuff is going and I'm not sure your goverment backed account is really that secure.
ChuckMcM 11y ago
I think you're confusing loss of value with loss of savings. So if your stocks lose half their value, then you now have "less cash equivalent savings" but you still have savings. Even in the dot com crash (where I was not diversified and had a lot of tech stocks) the reduction in value across the board was, in aggregate, about 70% even though some stocks it was 99.9%. But all of that was "ok" because I didn't need that money to live on, it was "savings". Similarly with house values, if you own your home outright it doesn't matter if the real estate market crashes, you can still live there. But it might make moving less desirable (or not if you can find a good deal somewhere else). The article is talking about people who find themselves unable to pay for repairing a vehicle after an accident without going into credit card debt. That can start a spiral into insolvency.
zardo 11y ago
A market crash severe enough to whipe out stocks, bonds, and real estate, is also going to effect fiat currency. In order for the FDIC to actually cover the saving accounts for the defaulted banks, we would have to create many many new dollars.
Retric 11y ago
I really don't see a significant advantage to using a savings account with a bank. Keeping 50k in a checking account vs savings account costs you less than 5$ a month before taxes which is just not worth the effort of opening a second account for someone that's keeping 50k cash on hand.
riskneural 11y ago
100k in stocks after a shock crazy crash of 70% can still be painfully liquidated for 30k.
morgante 11y ago
> You're exactly the kind of person this article is pointing out, because your ability to be wiped away by the market is a precarious position to be in. Any scenario where the stock market declines by 99% ($100k to $1k) would basically mean the collapse of the entire financial system. I doubt your bank savings account would be very useful in that scenario. Moreover, I don't think this article is actually talking about people who do save but just choose to save into high-return assets. I save 80-90% of my income, but it all goes into index funds. Does that mean I am not "a saver?"
- toomuchtodo 11y ago
  > Moreover, I don't think this article is actually talking about people who do save but just choose to save into high-return assets. I save 80-90% of my income, but it all goes into index funds. Does that mean I am not "a saver?" Not at all. This article is about people who aren't saving because they don't think its necessary or because they can't afford to. An emergency fund IS NOT an investment. It is insurance; treat it as such.
  - morgante 11y ago
    > An emergency fund IS NOT an investment. Why should one have an "emergency fund?" I would genuinely love to hear a good argument for why keeping any cash assets when one has significant liquid investments, as I've never encountered one. Insurance companies invest their premiums. Why shouldn't I?
    - toomuchtodo 11y ago
      Insurance companies and banks are required to maintain a minimum amount of safe/liquid (read: cash) reserves. > I would genuinely love to hear a good argument for why keeping any cash assets when one has significant liquid investments, Can you describe an asset (besides US treasuries) that you can be assured of its value in a volatile market? Even money market funds have broken the buck before (~2008).
      - 11y ago
goodcjw2 11y ago
Given the interest rate so low, saving is definitely a "smart" answer. Keep cash and keep invest seems to be a "wise" choice in our current market. So, it might be the market (or policy maker) to blame...

You're exactly the kind of person this article is pointing out, because your ability to be wiped away by the market is a precarious position to be in.

by Laaw 11y ago

You're exactly the kind of person this article is pointing out, because your ability to be wiped away by the market is a precarious position to be in.

HLRoku 11y ago

I don't really follow how having money in stocks, bonds and a house is somehow capable of being wiped away by the market when a savings account in a bank wouldn't be in dire straits with such an economic upheaval to render those 3 investments useless

Laaw 11y ago
I'm sorry you don't follow, but it should be fairly obvious that stocks can crash, bond markets can collapse, and home prices can plummet, whereas money in FDIC insured savings accounts would only be lost in the event of a catastrophic, country-jeopardizing event, in which case we'll all have bigger problems. I'm not meaning to attack anyone personally, I just think this survey is trying to suss out what percentage of Americans are in a position such that an economic downturn would hurt them severely. I also don't know much at all about finances, so take what I'm saying with a jar of salt.
- morgante 11y ago
  Not even the worst stock crash in history was a 99% drop. Also, you are almost 100% wrong about the intention of the article. It's not that they're trying to make some point about people's poor asset allocation, it's just sloppy reporting. If their actual point was that people had too much money invested, wouldn't the most obvious and actionable advice for the "What to Do If Your Savings Fall Short" section be to sell some shares and transfer the cash into a savings account? It's on you to prove why your financially unwise viewpoint is correct.
  - Laaw 11y ago
    The attitude you're bringing to this conversation makes me entirely unwilling to continue. Sorry.
    - morgante 11y ago
      I think you're the one who might need an attitude adjustment. Instead of providing reasoning for why cash is necessary, you continue to belittle people who invest their assets.

beambot 11y ago

What? Let's assume he's intelligent and has good diversification (eg. he mentioned bonds, stocks, home, and cash -- probably in a investment account). If all his financial positions got "wiped out" in a broad-sweeping financial collapse, then "cash in savings" would be equally worthless. In the meantime, he has a home to live in. Plus, most investment accounts give you easy access for withdrawals (eg. debit cards) or the ability to borrow while transfers or sales settle. I fail to see how it's precarious.

Laaw 11y ago
You're the second person to say this, but how would "cash in savings" be equally worthless? Maybe I'm not understanding, but it's pretty difficult to actually lose money in a savings account, that's the whole point.
- scott_karana 11y ago
  > in a broad-sweeping financial collapse, then "cash in savings" would be equally worthless. > how would "cash in savings" be equally worthless? Maybe I'm not understanding, but it's pretty difficult to actually lose money in a savings account, that's the whole point. The cash wouldn't be lost, but it would have reduced purchasing power in a recession. And if inflation is steep, you're actively "losing" money. It would be "worthless" in the context of long-term investing, because nothing would have long-term worth.
  - antientropic 11y ago
    Why would the cash have reduced purchasing power in a recession? Sure, that would be the case if there was high inflation, but that certainly wasn't the case with the 2008 crisis.
  - mywittyname 11y ago
    You have that backwards, during a recession Cash is King. $10,000 in summer 2009 bought you a hell of a lot more of practically anything than the same amount a year previously. People with cash on hand in 2009 made out like bandits. Cheap stocks, cheap houses, cheap cars. Everything was cheap, cheap, cheap.

runako 11y ago

I think you're implicitly doing an asset allocation for the poster. > Cash on hand or it's invested in stocks, bonds and my home. That could be $100k on hand in checking, $600k in stocks/bonds, and $200k in home equity, with $0 in a savings account. Asset allocations that don't use savings accounts are not necessarily 'precarious'. Also, it's worth noting that most financial advisors do not recommend that you keep a significant portion of your assets in savings accounts. Primary reason is that by not being in assets that deliver returns, you are losing money to inflation, even at these low levels of inflation. (Also, you have to save a ton more if you don't let your money multiply.)

Laaw 11y ago
You are, as far as I know, entirely correct. I still think the survey was designed specifically to find these people who exist in this manner, and I think your criticisms are valid when placed against the thrust of the survey.
misiti3780 11y ago
everytime someone says that, I always think of a great quote by Nouriel Roubini: "asked whether he invests in stocks, he replied, "Not as much these days. I used to have a lot in equities—about 75%—but over the past three years, I’ve had about 95% in cash and 5% in equities. You’re not getting much from savings these days but earning 0% is better than losing 50%." [1] https://en.wikipedia.org/wiki/Nouriel_Roubini https://en.wikipedia.org/wiki/Nouriel_Roubini
- enoch_r 11y ago
  Since June 2009, when that interview was conducted, the S&P500 has more than doubled, not including dividends, so I hope he switched back or he did, in a sense, "lose" 50%.
  - 6stringmerc 11y ago
    Counter point: Numerous financial experts assert the current valuations within the stock market do not reflect the underlying fundamentals; or, in other words, ZIRP allows for cheap debt in the bond markets which many firms are using to aggressively buy back stock, thereby artificially inflating the market value. Thus, "a correction" is due and his statement is still valid from a conservative investing standpoint.

Symmetry 11y ago

If the stock market falls by even just 80%, which is probably the minimum I'd call "wiped out" then things are bad enough that your savings account can't be trusted either.

jzig 11y ago
I strongly disagree with you and believe FDIC insured accounts can be trusted beyond a market fall of just 80%.
- UK-AL 11y ago
  Market fall of 80% in a portfolio that has been diversified isn't that bad. Say you 50% in shares. It has lost 80% of that 50%. That's not so bad. You still have a chunk of savings. If goverment bonds loose all their value, it means goverments are close to failing. If real estate is loosing all its value. It means people have no money to buy houses If all 3 is going on the same time, some serious stuff is going and I'm not sure your goverment backed account is really that secure.

ChuckMcM 11y ago

I think you're confusing loss of value with loss of savings. So if your stocks lose half their value, then you now have "less cash equivalent savings" but you still have savings. Even in the dot com crash (where I was not diversified and had a lot of tech stocks) the reduction in value across the board was, in aggregate, about 70% even though some stocks it was 99.9%. But all of that was "ok" because I didn't need that money to live on, it was "savings". Similarly with house values, if you own your home outright it doesn't matter if the real estate market crashes, you can still live there. But it might make moving less desirable (or not if you can find a good deal somewhere else). The article is talking about people who find themselves unable to pay for repairing a vehicle after an accident without going into credit card debt. That can start a spiral into insolvency.

zardo 11y ago

A market crash severe enough to whipe out stocks, bonds, and real estate, is also going to effect fiat currency. In order for the FDIC to actually cover the saving accounts for the defaulted banks, we would have to create many many new dollars.

Retric 11y ago

I really don't see a significant advantage to using a savings account with a bank. Keeping 50k in a checking account vs savings account costs you less than 5$ a month before taxes which is just not worth the effort of opening a second account for someone that's keeping 50k cash on hand.

riskneural 11y ago

100k in stocks after a shock crazy crash of 70% can still be painfully liquidated for 30k.

morgante 11y ago

> You're exactly the kind of person this article is pointing out, because your ability to be wiped away by the market is a precarious position to be in. Any scenario where the stock market declines by 99% ($100k to $1k) would basically mean the collapse of the entire financial system. I doubt your bank savings account would be very useful in that scenario. Moreover, I don't think this article is actually talking about people who do save but just choose to save into high-return assets. I save 80-90% of my income, but it all goes into index funds. Does that mean I am not "a saver?"

toomuchtodo 11y ago
> Moreover, I don't think this article is actually talking about people who do save but just choose to save into high-return assets. I save 80-90% of my income, but it all goes into index funds. Does that mean I am not "a saver?" Not at all. This article is about people who aren't saving because they don't think its necessary or because they can't afford to. An emergency fund IS NOT an investment. It is insurance; treat it as such.
- morgante 11y ago
  > An emergency fund IS NOT an investment. Why should one have an "emergency fund?" I would genuinely love to hear a good argument for why keeping any cash assets when one has significant liquid investments, as I've never encountered one. Insurance companies invest their premiums. Why shouldn't I?
  - toomuchtodo 11y ago
    Insurance companies and banks are required to maintain a minimum amount of safe/liquid (read: cash) reserves. > I would genuinely love to hear a good argument for why keeping any cash assets when one has significant liquid investments, Can you describe an asset (besides US treasuries) that you can be assured of its value in a volatile market? Even money market funds have broken the buck before (~2008).
    - 11y ago

goodcjw2 11y ago

Given the interest rate so low, saving is definitely a "smart" answer. Keep cash and keep invest seems to be a "wise" choice in our current market. So, it might be the market (or policy maker) to blame...