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The thing that I don't understand about this logic is that in the event of an economic downturn or disaster, if you lost your job the market would also be on th
by donjh 11y ago
The thing that I don't understand about this logic is that in the event of an economic downturn or disaster, if you lost your job the market would also be on the decline - the worst time to sell. Isn't it better to keep a couple month's expenses in savings, even if only for the peace of mind?
- robrenaud 11y agoDoes it matter? Sure, consider that $10k or whatever that you need for a couple months after you lose your job. In an economic downturn, if your stocks/bonds lose half their value, it costs you $20k of pre downturn, investment dollars rather than the $10k of pre-down turn dollars if the money was in a savings account.
- lmm 11y agoEverything has a cost - however much you're holding in cash you're effectively burning ~3% of that each year. How quickly do bills come due? If I lost my job tomorrow I could take a payment holiday on my mortgage (since I've made overpayments) and pay for food and the like with my credit card (and in my specific case as a contractor I'd have what I'd earned last month, but I appreciate that doesn't apply to everyone); I'd certainly have a few months' leeway to sell some stocks/bonds/whatever, and what you lose in a slump is less than what you gain during the boom period.