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The general point about cash losing money to inflation is spot on, but: > Why downvote? If you disagree, please say why. Sure, so > Stonks are stonks. They'r
by dmoy 5y ago
The general point about cash losing money to inflation is spot on, but:
> Why downvote? If you disagree, please say why.
Sure, so
> Stonks are stonks. They're fine, but they don't provide the (at least) two fold benefit of buying a house in American society.
If you look at averages (across multiple areas, over many decades), you get:
* stonks yield somewhere around 6% above inflation (so 9-10% before inflation).
* houses yield somewhere around 1% above inflation, after including all the other random incentives plus taxes and upkeep costs, (not including multi family rental properties, which is a different matter)
There are localities in which houses do much better (say the bay area), and there are localities in which houses do much worse (Detroit).
But on average, it's a massive opportunity cost vs investing in equities. Which is fine, because there's other benefits to owning a house, like not having to move if someone jacks up your rent.
While we're at it, other reasons for downvotes may include:
> metals soon
These yield also ~1% above inflation
> I'll never hold more dollars than I need for a month (I have credit cards if it really came to it.)
In 2008, the banks slashed my credit to <10% of what it was in 2007. Don't rely on credit cards for emergencies.
Please hold more than 1 month in savings.
- reedjosh 5y ago> * houses yield somewhere around 1% above inflation But buying a house is the only way I can leverage such a massive amount and I have to have housing anyway. It also fixes my housing costs in contrast to renting. Further, I can sell my house and take gains without paying taxes on the gains. I can't do that with stocks. > Don't rely on credit cards for emergencies. I'll also be able to sell metals/stonks/cryptos if need be, but overall I'm just not risk adverse. If I end up selling to get by and lose some, I see that as just making up for what I would have already lost by holding too much cash.
- dmoy 5y agoI should note that the 90% credit drop also coincided at a time when my investments crashed by 50%+, which would have been an extremely suboptimal time to pull out money. That would have wiped out like 10 years of growth. I strongly, strongly encourage you to put aside at least 3 to 6 months' worth of expenses outside of risky investments.
- tylerhou 5y agoTo add on to your point, the core issue is that you need to take into account correlated risk when deciding on your investment strategy/risk tolerance. If you're at the point where you need to dip into an emergency fund, it's possible (maybe even likely) that the entire financial market is burning. You will need access to capital when nobody has access to capital, which will make borrowing very expensive or impossible.