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What is the best thing to do with my savings? I am thinking about investing, and read up on it. One thing I don't understand is where to put money to minimize t

What is the best thing to do with my savings? I am thinking about investing, and read up on it. One thing I don't understand is where to put money to minimize the impact of a recession. Government bonds? But then Graham says, I think, bonds prices also rise in a bull market, and fall afterwards.

yosito 9y ago
I'm not an expert, but I think the safest strategy in an uncertain circumstance is to not put all your eggs in one basket: diversify!
yequalsx 9y ago
If you truly, deep down in your heart, believe there is a crash coming soon then the best thing you can do with your money is to keep it in cash. Invest after the crash. If, like most people, you aren't absolutely certain there will be a crash then you invest for the long haul. You have a diversified set of investments. You put in a little bit each month. After 30 years, barring a civilization destroying event, you'll be fine.
- kazagistar 9y ago
  ... assuming the crash isn't accompanied by significant inflation, which would wipe out cash stores too.
margorczynski 9y ago
Cash (a strong, value holding currency like the USD, CHF, maybe Euro but it also depends where the spark will be of the crisis), wait it out and when the biggest panic goes buy the undervalued assets when they're near the bottom. Gold is also an option but physical, a paper guarantee is nothing
- freyir 9y ago
  If you started this strategy 7 or 8 years ago, you probably didn’t expect the market to climb for so long. Who knows how much longer they’ll have to wait till you can make your move? In the meantime, inflation is slowly gnawing away at your cash horde.
mhb 9y ago
You could consider the Permanent Portfolio proposed by Harry Browne. Plenty of search results.
MiguelVieira 9y ago
Increase your investment allocation of Treasury Inflation Protected Securities: https://www.investopedia.com/terms/t/tips.asp https://www.investopedia.com/terms/t/tips.asp
junkscience2017 9y ago
you should only be trying to reduce the harm of a recession if you plan on liquidating assets in the near term. if you are under forty and saving for retirement, do nothing...the recession will be far in the rear view mirror by time you want to sell
hackermailman 9y ago
10% gov bonds and rest in Vanguard S&P 500 index funds, and just ride the market average for next 30 years is Buffet's advice since it has the least management fees https://news.ycombinator.com/item?id=14259538 https://news.ycombinator.com/item?id=14259538
- ThrustVectoring 9y ago
  The total stock market index fund (VTSAX) is a slightly better choice IMO, but it really doesn't matter much either way.
lmm 9y ago
Traditionally bonds and stocks move inversely: stocks are higher risk and correspondingly higher returns. But of course they have to add up to the overall economy; fundamentally you should expect to make more money when the world is being more productive and less money when the world is being less productive, and any investment that doesn't have that behaviour is going to be artificial and disconnected from actual productivity, making it unlikely to be a good bet in the long run. (See Buffet's comments about a gold cube). If you're investing for more than 10 years, the best thing is not to worry about recessions: they're part of the cycle, and even out in the long run; just buy and hold and eventually you'll come out ahead. If you're investing with a particular deadline less than 10 years in the future (e.g. as you get towards retirement) then it's traditional to shift your portfolio towards lower-risk, lower-return investments (indeed government bonds as you suggest); some retirement accounts do this "automatically". Traditional advice is to invest largely within your own country so that you're not taking on extra currency risk, to keep a certain amount of cash/gold/what-have-you just in case of a huge general crash, and to get appropriate exposure to property. There are two contradictory schools of thought on this: 1) treat it as an asset class, hold a similar proportion what you hold in stocks/bonds 2) you will need one home for the rest of your life, ensure you have exactly one home's worth of exposure to the property market, otherwise property makes no sense as an investment for the same reason as the gold cube. There are only a couple of free lunches in investment: tax efficiency and low fees. So those are the main places to look to optimise: your local legal environment will probably offer various tax-advantaged forms of savings to encourage particular kinds of saving (e.g. retirement accounts), and while most funds will have average performance in the long run, a low-fee fund means you'll keep more of the benefits (if you're in the US, Vanguard is commonly recommended).
gdubs 9y ago
Speak to a financial advisor (a fiduciary). One consideration is whether you’ll need cash in the near term (<5 years). The other is whether you have expensive debt, like credit cards. Dollar cost averaging might be a way to reduce risk a little bit (deciding on a regular amount / interval and sticking to that whatever happens.) Finally, do you have an adequate safety net? (6m - 1yr of expenses in an insured account.)
pnathan 9y ago
Diversify yo' assets. I recommend starting with ETFs, ensuring you aren't locked into specific companies. And ETFs don't have the specific conditions of mutual funds. Several stock ETFs; I suggest one tuned for growth and one tuned for dividends. If you aren't sure, the Vanguard VOO ETF is a solid starting point. At least one bond ETF: I'm inexperienced there, but they tend to move in inverse correlation to stocks. Some cash: 6 months of income, if you can swing it. You'll want to set up a plan to invest regularly, and a regular rebalanceing of the portfolio to ensure one asset class doesn't dominate the others and expose you to too much risk. If you want to allocate 10% to things like gold ETFs, futures, Bitcoin, etc, that's not unreasonable, but you should do so with the understanding that such a play is a high risk one and likely to result in monetary loss without quite a bit of care. edit: you have two kinds of risk: downside risk and counterparty risk. Downside with investing is your money might go away. Barring radical economic collapse, it'll come back, eventually (> 5-10 year span), if you've diversified enough. Counterparty risk is what if the event you're worried about doesn't happen. Suppose you're worried about a recession. What if it doesn't happen? People were seriously worried about Total Economic Meltdown in 2008. Lot of people got out of the market or didn't get in, and they wound up with a lot less money than if they'd held on. On the other side, guns, ammo, and food supply companies went gangbusters. And, looking back on it, pointlessly. It's reasonable to assume the bull market will end. It's running a bit long as it stands now. Fine. Do you care if your stock money all drops by half, so long as it's back and more within a decade? Make a plan designed to optimize for your goals and rigidly stick to it in the face of irrationality.
- sytelus 9y ago
  US ETFs are no longer diversification. Now that everybody is doing it, when market goes down ETFs will fall from sky as well at same or faster rates. More importantly, most ETFs are tied with one market, one country and one currency. For true diversification, you want to have gold, oil, Chinese, Russian, Asian along with usual American ETFs.
  - pnathan 9y ago
    You expose yourself to currency risk as well with that strategy. I primarily worry about single company failures and wobbles; if the US economy implodes, the rest of the world will be caught up in it. But you're right, you should balance with non-US as well. I've steered clear of them, myself, but that's not per se ideal practice and I'm overdue for a rebalancing. But, to be clear, I was sketching an entry level into investing, not a more sophisticated approach.

yosito 9y ago

I'm not an expert, but I think the safest strategy in an uncertain circumstance is to not put all your eggs in one basket: diversify!

yequalsx 9y ago

If you truly, deep down in your heart, believe there is a crash coming soon then the best thing you can do with your money is to keep it in cash. Invest after the crash. If, like most people, you aren't absolutely certain there will be a crash then you invest for the long haul. You have a diversified set of investments. You put in a little bit each month. After 30 years, barring a civilization destroying event, you'll be fine.

kazagistar 9y ago
... assuming the crash isn't accompanied by significant inflation, which would wipe out cash stores too.

margorczynski 9y ago

Cash (a strong, value holding currency like the USD, CHF, maybe Euro but it also depends where the spark will be of the crisis), wait it out and when the biggest panic goes buy the undervalued assets when they're near the bottom. Gold is also an option but physical, a paper guarantee is nothing

freyir 9y ago
If you started this strategy 7 or 8 years ago, you probably didn’t expect the market to climb for so long. Who knows how much longer they’ll have to wait till you can make your move? In the meantime, inflation is slowly gnawing away at your cash horde.

mhb 9y ago

You could consider the Permanent Portfolio proposed by Harry Browne. Plenty of search results.

MiguelVieira 9y ago

Increase your investment allocation of Treasury Inflation Protected Securities: https://www.investopedia.com/terms/t/tips.asp https://www.investopedia.com/terms/t/tips.asp

junkscience2017 9y ago

you should only be trying to reduce the harm of a recession if you plan on liquidating assets in the near term. if you are under forty and saving for retirement, do nothing...the recession will be far in the rear view mirror by time you want to sell

hackermailman 9y ago

10% gov bonds and rest in Vanguard S&P 500 index funds, and just ride the market average for next 30 years is Buffet's advice since it has the least management fees https://news.ycombinator.com/item?id=14259538 https://news.ycombinator.com/item?id=14259538

ThrustVectoring 9y ago
The total stock market index fund (VTSAX) is a slightly better choice IMO, but it really doesn't matter much either way.

lmm 9y ago

Traditionally bonds and stocks move inversely: stocks are higher risk and correspondingly higher returns. But of course they have to add up to the overall economy; fundamentally you should expect to make more money when the world is being more productive and less money when the world is being less productive, and any investment that doesn't have that behaviour is going to be artificial and disconnected from actual productivity, making it unlikely to be a good bet in the long run. (See Buffet's comments about a gold cube). If you're investing for more than 10 years, the best thing is not to worry about recessions: they're part of the cycle, and even out in the long run; just buy and hold and eventually you'll come out ahead. If you're investing with a particular deadline less than 10 years in the future (e.g. as you get towards retirement) then it's traditional to shift your portfolio towards lower-risk, lower-return investments (indeed government bonds as you suggest); some retirement accounts do this "automatically". Traditional advice is to invest largely within your own country so that you're not taking on extra currency risk, to keep a certain amount of cash/gold/what-have-you just in case of a huge general crash, and to get appropriate exposure to property. There are two contradictory schools of thought on this: 1) treat it as an asset class, hold a similar proportion what you hold in stocks/bonds 2) you will need one home for the rest of your life, ensure you have exactly one home's worth of exposure to the property market, otherwise property makes no sense as an investment for the same reason as the gold cube. There are only a couple of free lunches in investment: tax efficiency and low fees. So those are the main places to look to optimise: your local legal environment will probably offer various tax-advantaged forms of savings to encourage particular kinds of saving (e.g. retirement accounts), and while most funds will have average performance in the long run, a low-fee fund means you'll keep more of the benefits (if you're in the US, Vanguard is commonly recommended).

gdubs 9y ago

Speak to a financial advisor (a fiduciary). One consideration is whether you’ll need cash in the near term (<5 years). The other is whether you have expensive debt, like credit cards. Dollar cost averaging might be a way to reduce risk a little bit (deciding on a regular amount / interval and sticking to that whatever happens.) Finally, do you have an adequate safety net? (6m - 1yr of expenses in an insured account.)

pnathan 9y ago

Diversify yo' assets. I recommend starting with ETFs, ensuring you aren't locked into specific companies. And ETFs don't have the specific conditions of mutual funds. Several stock ETFs; I suggest one tuned for growth and one tuned for dividends. If you aren't sure, the Vanguard VOO ETF is a solid starting point. At least one bond ETF: I'm inexperienced there, but they tend to move in inverse correlation to stocks. Some cash: 6 months of income, if you can swing it. You'll want to set up a plan to invest regularly, and a regular rebalanceing of the portfolio to ensure one asset class doesn't dominate the others and expose you to too much risk. If you want to allocate 10% to things like gold ETFs, futures, Bitcoin, etc, that's not unreasonable, but you should do so with the understanding that such a play is a high risk one and likely to result in monetary loss without quite a bit of care. edit: you have two kinds of risk: downside risk and counterparty risk. Downside with investing is your money might go away. Barring radical economic collapse, it'll come back, eventually (> 5-10 year span), if you've diversified enough. Counterparty risk is what if the event you're worried about doesn't happen. Suppose you're worried about a recession. What if it doesn't happen? People were seriously worried about Total Economic Meltdown in 2008. Lot of people got out of the market or didn't get in, and they wound up with a lot less money than if they'd held on. On the other side, guns, ammo, and food supply companies went gangbusters. And, looking back on it, pointlessly. It's reasonable to assume the bull market will end. It's running a bit long as it stands now. Fine. Do you care if your stock money all drops by half, so long as it's back and more within a decade? Make a plan designed to optimize for your goals and rigidly stick to it in the face of irrationality.

sytelus 9y ago
US ETFs are no longer diversification. Now that everybody is doing it, when market goes down ETFs will fall from sky as well at same or faster rates. More importantly, most ETFs are tied with one market, one country and one currency. For true diversification, you want to have gold, oil, Chinese, Russian, Asian along with usual American ETFs.
- pnathan 9y ago
  You expose yourself to currency risk as well with that strategy. I primarily worry about single company failures and wobbles; if the US economy implodes, the rest of the world will be caught up in it. But you're right, you should balance with non-US as well. I've steered clear of them, myself, but that's not per se ideal practice and I'm overdue for a rebalancing. But, to be clear, I was sketching an entry level into investing, not a more sophisticated approach.