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If you have a steady income and significant savings (say, anything more than six months of expenses), and you haven’t invested a significant fraction of that sa

If you have a steady income and significant savings (say, anything more than six months of expenses), and you haven’t invested a significant fraction of that savings in some growth-oriented asset class like stocks, you’re making a very foolish long-term decision.

lmarcos 6y ago
I don't disagree. I just say that, in my limited life experience, most of my acquaintances do not have other thing than cash in the bank. These acquaintances are not precisely "poor".
- chrisseaton 6y ago
  > most of my acquaintances do not have other thing than cash in the bank That's madness - I can't imagine why they'd do that. Their money would be rapidly eroding away. But also - remember almost every professional has a pension, which is always invested, so yes almost every professional owns stocks and shares.
  - adamnew123456 6y ago
    > That's madness - I can't imagine why they'd do that. I think your confusion is in assuming that this is something you do rather than it being the status quo that receives no attention. Up until recently I had about $80k sitting in a HYSA while interest rates on that account dropped like a rock. I only really noticed that after crunching the numbers and figuring out that was much beyond what I would realistically need. It took a few days to figure out what I could do about that given my income and employment situation. I'm not sure how much of this applies to someone who is natively middle-class, but I find that part of the luxury of having a good income and a minimal lifestyle is just not thinking about money. If that's where your baseline is then you need some other motivation to scrutinize your finances. It comes more easily to me because I find it interesting but I can see someone without that drive just letting cash sit and being satisfied that the number looks big enough.
    - chrisseaton 6y ago
      Here's a motivating way to think about it - if you have $100k in a bank account and you're getting 0 or next to 0 interest, you're effectively paying about $7.5k a year for that bank account in the first year, due to a guesstimate 7.5% long-term medium risk amortised investment return you missed out on. Due to compound interest the amount you're effectively paying is going to keep going up every year. After 20 years the effective yearly fee you're paying for having that bank account is... $30k a year. Maybe that $30k a year fee to store $100k is worth if to some people due to the government-backend security of bank deposits... but long term I think the dealer is always winning that game. People need to learn about interest and compound interest in school. And this is all before we even talk about inflation further eating into your pile. Money in a bank account is dead money - it'll rot away to nothing.
      - bfostbfostbfost 6y ago
        Can you please give some advice as to how to convert cash savings to a better yield investment? Especially in this current market where it “feels” to me (I am ignorant) that the stock market is artificially high. Maybe start to dollar cost average in to etf/mutual funds, to avoid a bad timing of “shift cash into market at an all time high right before it crashes”? Sorry for the ignorant question but the thought of cash savings eroding quickly while I don’t really know the best plan for it keeps me up at night. Cheers.
        chrisseaton 6y ago
        The US markets may feel artificially high to you, but a conventional modest-return, low-risk investment account that you can arrange with any high-street investment advisor is going to be extremely broad in their portfolio. The US markets that you think are inflated may comprise 5% or something of it. It'll also be invested in Asia, Africa, South America, and in different industries. These kind of broad and boring investments always return about 5-10% or something like that a year. Occasionally they go down one year if there's a big bust up, but if you look over a ten year window it's always going up. So why doesn't everyone invest in them if they're so dependable? Am I selling a get-rich-quick scheme? The reason is they're too modest for most people who are trying to get more like 15%. But those people take more risk - the kind of risk you're probably worried about. And so why does the bank pay so little interest? Well they're getting that 5-10% from similar modest-return, low-risk investments (well probably a bit less less as they're more cautious)... and pocketing it.
statstutor 6y ago
Since you will have to pay for housing in [local currency], and I'd usually prioritise housing higher than optimally growing wealth, I'd suggest you first hold enough cash to pay for housing as far as you need it - probably a lot longer than 6 months. Your advice is fine advice, if you already own your housing and have savings on top of that, which many or most people don't.
jtdev 6y ago
The equities and real estate markets don’t exactly look appealing right now; I can either watch inflation slowly eat at savings while waiting for better market conditions, or potentially watch a significant portion of net worth evaporate when a mega correction occurs - which is looking very likely.
- deanmoriarty 6y ago
  If your cash position is a one-time thing that’s fine I guess, but if you’ve been saying that for a few years (most people in that position do, not saying it’s you) then you’ve been losing a lot. I’ve been constantly invested in index funds for 10+ years, never sold a position, including before/after March 2020. Some positions I have are up more than 200%. A crash of 50% won’t do me too much damage, I’ll still be way, way far ahead of the many friends I have who have been in cash since 2015, repeating your same “a correction is likely, I’ll wait for the bottom to get in”.
  - jtdev 6y ago
    I have a similar approach: I typically have ~60% of net worth invested across index funds and tech growth stocks. But I’ve been building my cash position in recent months mostly via sale of said index funds and growth stocks (I was able to dodge the downturn in tech stocks in recent weeks), but also by simply banking funds that would otherwise have been put directly into equities. Now I’m reluctant to reinvest as I see significant risk in the market short term. I don’t intend to remain on the sidelines. I’m beginning to question the maxim that “you can’t time the market”... sure, you’re unlikely to time the exact top or bottom, but an approximation can result in significant risk reduction and/or upside.
- frongpik 6y ago
  You sound like a surfer who is watching big waves at the shore and is waiting for "the right moment", but at any moment it's either too shallow for the surf board, or there's a big scary wave that's about to collapse.
- imtringued 6y ago
  The best time to start is today but you should never put all your money into something you don't understand. Start small and grow from there. You'll probably change your mind along the way.
iso1210 6y ago
> If you have a steady income and significant savings Only the richest have 6 months expenses in savings. Majority live paycheck-to-paycheck

lmarcos 6y ago

I don't disagree. I just say that, in my limited life experience, most of my acquaintances do not have other thing than cash in the bank. These acquaintances are not precisely "poor".

chrisseaton 6y ago
> most of my acquaintances do not have other thing than cash in the bank That's madness - I can't imagine why they'd do that. Their money would be rapidly eroding away. But also - remember almost every professional has a pension, which is always invested, so yes almost every professional owns stocks and shares.
- adamnew123456 6y ago
  > That's madness - I can't imagine why they'd do that. I think your confusion is in assuming that this is something you do rather than it being the status quo that receives no attention. Up until recently I had about $80k sitting in a HYSA while interest rates on that account dropped like a rock. I only really noticed that after crunching the numbers and figuring out that was much beyond what I would realistically need. It took a few days to figure out what I could do about that given my income and employment situation. I'm not sure how much of this applies to someone who is natively middle-class, but I find that part of the luxury of having a good income and a minimal lifestyle is just not thinking about money. If that's where your baseline is then you need some other motivation to scrutinize your finances. It comes more easily to me because I find it interesting but I can see someone without that drive just letting cash sit and being satisfied that the number looks big enough.
  - chrisseaton 6y ago
    Here's a motivating way to think about it - if you have $100k in a bank account and you're getting 0 or next to 0 interest, you're effectively paying about $7.5k a year for that bank account in the first year, due to a guesstimate 7.5% long-term medium risk amortised investment return you missed out on. Due to compound interest the amount you're effectively paying is going to keep going up every year. After 20 years the effective yearly fee you're paying for having that bank account is... $30k a year. Maybe that $30k a year fee to store $100k is worth if to some people due to the government-backend security of bank deposits... but long term I think the dealer is always winning that game. People need to learn about interest and compound interest in school. And this is all before we even talk about inflation further eating into your pile. Money in a bank account is dead money - it'll rot away to nothing.
    - bfostbfostbfost 6y ago
      Can you please give some advice as to how to convert cash savings to a better yield investment? Especially in this current market where it “feels” to me (I am ignorant) that the stock market is artificially high. Maybe start to dollar cost average in to etf/mutual funds, to avoid a bad timing of “shift cash into market at an all time high right before it crashes”? Sorry for the ignorant question but the thought of cash savings eroding quickly while I don’t really know the best plan for it keeps me up at night. Cheers.
      - chrisseaton 6y ago
        The US markets may feel artificially high to you, but a conventional modest-return, low-risk investment account that you can arrange with any high-street investment advisor is going to be extremely broad in their portfolio. The US markets that you think are inflated may comprise 5% or something of it. It'll also be invested in Asia, Africa, South America, and in different industries. These kind of broad and boring investments always return about 5-10% or something like that a year. Occasionally they go down one year if there's a big bust up, but if you look over a ten year window it's always going up. So why doesn't everyone invest in them if they're so dependable? Am I selling a get-rich-quick scheme? The reason is they're too modest for most people who are trying to get more like 15%. But those people take more risk - the kind of risk you're probably worried about. And so why does the bank pay so little interest? Well they're getting that 5-10% from similar modest-return, low-risk investments (well probably a bit less less as they're more cautious)... and pocketing it.

statstutor 6y ago

Since you will have to pay for housing in [local currency], and I'd usually prioritise housing higher than optimally growing wealth, I'd suggest you first hold enough cash to pay for housing as far as you need it - probably a lot longer than 6 months. Your advice is fine advice, if you already own your housing and have savings on top of that, which many or most people don't.

jtdev 6y ago

The equities and real estate markets don’t exactly look appealing right now; I can either watch inflation slowly eat at savings while waiting for better market conditions, or potentially watch a significant portion of net worth evaporate when a mega correction occurs - which is looking very likely.

deanmoriarty 6y ago
If your cash position is a one-time thing that’s fine I guess, but if you’ve been saying that for a few years (most people in that position do, not saying it’s you) then you’ve been losing a lot. I’ve been constantly invested in index funds for 10+ years, never sold a position, including before/after March 2020. Some positions I have are up more than 200%. A crash of 50% won’t do me too much damage, I’ll still be way, way far ahead of the many friends I have who have been in cash since 2015, repeating your same “a correction is likely, I’ll wait for the bottom to get in”.
- jtdev 6y ago
  I have a similar approach: I typically have ~60% of net worth invested across index funds and tech growth stocks. But I’ve been building my cash position in recent months mostly via sale of said index funds and growth stocks (I was able to dodge the downturn in tech stocks in recent weeks), but also by simply banking funds that would otherwise have been put directly into equities. Now I’m reluctant to reinvest as I see significant risk in the market short term. I don’t intend to remain on the sidelines. I’m beginning to question the maxim that “you can’t time the market”... sure, you’re unlikely to time the exact top or bottom, but an approximation can result in significant risk reduction and/or upside.
frongpik 6y ago
You sound like a surfer who is watching big waves at the shore and is waiting for "the right moment", but at any moment it's either too shallow for the surf board, or there's a big scary wave that's about to collapse.
imtringued 6y ago
The best time to start is today but you should never put all your money into something you don't understand. Start small and grow from there. You'll probably change your mind along the way.

iso1210 6y ago

> If you have a steady income and significant savings Only the richest have 6 months expenses in savings. Majority live paycheck-to-paycheck