4 ms·

So important question, where should we be storing money that we need in the short term (down payment) and long term (retirement savings)?

JKCalhoun 5y ago
Short term: mattress, Long term: still in index funds Warning, I am an internet rando and not an accountant.
- kaycebasques 5y ago
  Regardless of whether or not we are indeed in an inflationary environment, mattress (physical cash) is the opposite of what you'd want to do in an inflationary scenario. Read up on the experiences of any one who relied on a fixed income pension or salary during one of the really intense inflation episodes throughout history. E.g. you get $1000 a month and suddenly just a single loaf of bread is worth $5000.
  - JKCalhoun 5y ago
    Agree, but with savings essentially zero interest the difference is in the noise. OP mentioned downpayment, which I (probably mistakenly) took to mean cash needed very soon. Honestly I have no idea what to do with cash needed a year out. Bear the brunt of pain that is inflation, I guess? I mean, sure, buy gold, a traditional hedge against inflation, but for just a year? And it still seems speculative at best.
    - 3np 5y ago
      Some percentage of allocation in cryptocurrencies (BTC, ETH, maybe one or two more if you invest more time in reading up) may not be a bad idea. (I'm not implying to invest or speculate with what you can't afford to lose and this is not financial advise.)
WJW 5y ago
Not that it is an unimportant question, but HN is not a finance forum. If you need advice about this, please consult a qualified professional instead of asking essentially random people on the internet.
- silicon2401 5y ago
  From the HN guidelines > On-Topic: Anything that good hackers would find interesting. That includes more than hacking and startups. If you had to reduce it to a sentence, the answer might be: anything that gratifies one's intellectual curiosity. > In Comments > Be kind. Don't be snarky. Have curious conversation; don't cross-examine. Please don't fulminate. Please don't sneer, including at the rest of the community. We are in an active period of economic and societal uncertainty. Hence the original post gratifies my intellectual curiosity and my comment expresses my curiosity about how to navigate the situation. If you want to be pedantic, I'm curious about how to hack this intellectually curious time to protect or grow my wealth. I appreciate your concern, but I'm not going to take some stranger's advice and follow it to a T. I'm curious to see what people's thoughts on the matter are and use that to adjust my own research.
  - WJW 5y ago
    Alright, perhaps I've been exposed to a few too many overenthusiastic colleagues who hype a new shitcoin every day. At least a few of those have already lost large-ish sums due to this and it has given them significant worry that I would not wish on anyone else. OTOH, finance is indeed an interesting topic so why not. FWIW, my short term obligations (mortgage, food, etc for the upcoming few months) will be met with cash since I work as a freelancer and income is "lumpy". For the long term, stocks in companies with a long term competitive advantage (strong brand, technological know-how, etc) is where I think it is at. They will be able to raise their prices in the face of inflation and maintain profitability. Investments that I would stay away from are most forms of fixed-rate bonds and companies with capital-intensive/low margin activities because the rising costs of inventory and depreciation will eat up a significant chunk of their free cash flow. As you can probably tell from the previous paragraph, I am personally a firm believer in investing in economic activity of some sort, either purchasing a share of (the earnings of) a company or lending out money to a company or government and therefore I stay away from "inert" investments that don't generate income by themselves like currencies, gold, commodities and/or crypto. That's just my preference though, and plenty of people would advise gold or bitcoin as an inflation hedge. Some of them have even done well, though a similar amount of people have done poorly in gold or BTC so buyer beware.
donatj 5y ago
Gold is and historically has been one of the best stores of value.
- csomar 5y ago
  Couldn't be more wrong: https://www.macrotrends.net/1333/historical-gold-prices-100-year-chart https://www.macrotrends.net/1333/historical-gold-prices-100-... Gold is quite volatile. The chart shows how inflation-adjusted gold can lose %70-80 in a very short period of time; and how it can take a really long time for the price to recover.
  - donatj 5y ago
    The volatility is in the currency.
  - kaycebasques 5y ago
    The chart that you provided actually shows that gold is often a strong investment in an inflationary environment. Notice the price action in the 1970s. Artemis Capital's Dragon Portfolio [1] idea explains the concept well. From my understanding the best explanation of gold's general behavior is real interest rates [2]. [1] https://artemiscm.docsend.com/view/taygkbn https://artemiscm.docsend.com/view/taygkbn [2] https://en.m.wikipedia.org/wiki/Real_interest_rate https://en.m.wikipedia.org/wiki/Real_interest_rate
mastax 5y ago
Short term: medium/low risk bonds, TIPS. Long term: equities.
- kaycebasques 5y ago
  My understanding is that traditional bonds (even high quality / low risk ones) frequently sell off (lose value) in inflationary environments. As mentioned elsewhere it's debatable whether we are actually in an inflationary environment currently.
aynyc 5y ago
Depending on how hard you want to manage your money. 1. Short term: instead of CD ladder, you can do TIPS ladder. 2. Long term: correctly allocated index based portfolio.
tedunangst 5y ago
If you are using CPI as the input to savings decisions, then you should be buying used cars.
JTbane 5y ago
Short-term TIPS or maybe I-bonds? They are pretty solid. Long term has always been stocks.
- harambae 5y ago
  In a calendar year, you can only acquire $10k in I bonds [0] What do you do with the other couple million you're stuck with? [0] https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_ibuy.htm https://www.treasurydirect.gov/indiv/research/indepth/ibonds...
JohnWhigham 5y ago
I recently took my short term cash and dumped it into some high yield dividend ETFs which are generally the safest stocks out there.
anotherman554 5y ago
It's not complicated, bank account for short term, stock index fund for long term. Short term crypto or stocks if you don't mind gambling and possibly not having the money when you need it.

JKCalhoun 5y ago

Short term: mattress, Long term: still in index funds Warning, I am an internet rando and not an accountant.

kaycebasques 5y ago
Regardless of whether or not we are indeed in an inflationary environment, mattress (physical cash) is the opposite of what you'd want to do in an inflationary scenario. Read up on the experiences of any one who relied on a fixed income pension or salary during one of the really intense inflation episodes throughout history. E.g. you get $1000 a month and suddenly just a single loaf of bread is worth $5000.
- JKCalhoun 5y ago
  Agree, but with savings essentially zero interest the difference is in the noise. OP mentioned downpayment, which I (probably mistakenly) took to mean cash needed very soon. Honestly I have no idea what to do with cash needed a year out. Bear the brunt of pain that is inflation, I guess? I mean, sure, buy gold, a traditional hedge against inflation, but for just a year? And it still seems speculative at best.
  - 3np 5y ago
    Some percentage of allocation in cryptocurrencies (BTC, ETH, maybe one or two more if you invest more time in reading up) may not be a bad idea. (I'm not implying to invest or speculate with what you can't afford to lose and this is not financial advise.)

WJW 5y ago

Not that it is an unimportant question, but HN is not a finance forum. If you need advice about this, please consult a qualified professional instead of asking essentially random people on the internet.

silicon2401 5y ago
From the HN guidelines > On-Topic: Anything that good hackers would find interesting. That includes more than hacking and startups. If you had to reduce it to a sentence, the answer might be: anything that gratifies one's intellectual curiosity. > In Comments > Be kind. Don't be snarky. Have curious conversation; don't cross-examine. Please don't fulminate. Please don't sneer, including at the rest of the community. We are in an active period of economic and societal uncertainty. Hence the original post gratifies my intellectual curiosity and my comment expresses my curiosity about how to navigate the situation. If you want to be pedantic, I'm curious about how to hack this intellectually curious time to protect or grow my wealth. I appreciate your concern, but I'm not going to take some stranger's advice and follow it to a T. I'm curious to see what people's thoughts on the matter are and use that to adjust my own research.
- WJW 5y ago
  Alright, perhaps I've been exposed to a few too many overenthusiastic colleagues who hype a new shitcoin every day. At least a few of those have already lost large-ish sums due to this and it has given them significant worry that I would not wish on anyone else. OTOH, finance is indeed an interesting topic so why not. FWIW, my short term obligations (mortgage, food, etc for the upcoming few months) will be met with cash since I work as a freelancer and income is "lumpy". For the long term, stocks in companies with a long term competitive advantage (strong brand, technological know-how, etc) is where I think it is at. They will be able to raise their prices in the face of inflation and maintain profitability. Investments that I would stay away from are most forms of fixed-rate bonds and companies with capital-intensive/low margin activities because the rising costs of inventory and depreciation will eat up a significant chunk of their free cash flow. As you can probably tell from the previous paragraph, I am personally a firm believer in investing in economic activity of some sort, either purchasing a share of (the earnings of) a company or lending out money to a company or government and therefore I stay away from "inert" investments that don't generate income by themselves like currencies, gold, commodities and/or crypto. That's just my preference though, and plenty of people would advise gold or bitcoin as an inflation hedge. Some of them have even done well, though a similar amount of people have done poorly in gold or BTC so buyer beware.

donatj 5y ago

Gold is and historically has been one of the best stores of value.

csomar 5y ago
Couldn't be more wrong: https://www.macrotrends.net/1333/historical-gold-prices-100-year-chart https://www.macrotrends.net/1333/historical-gold-prices-100-... Gold is quite volatile. The chart shows how inflation-adjusted gold can lose %70-80 in a very short period of time; and how it can take a really long time for the price to recover.
- donatj 5y ago
  The volatility is in the currency.
- kaycebasques 5y ago
  The chart that you provided actually shows that gold is often a strong investment in an inflationary environment. Notice the price action in the 1970s. Artemis Capital's Dragon Portfolio [1] idea explains the concept well. From my understanding the best explanation of gold's general behavior is real interest rates [2]. [1] https://artemiscm.docsend.com/view/taygkbn https://artemiscm.docsend.com/view/taygkbn [2] https://en.m.wikipedia.org/wiki/Real_interest_rate https://en.m.wikipedia.org/wiki/Real_interest_rate

mastax 5y ago

Short term: medium/low risk bonds, TIPS. Long term: equities.

kaycebasques 5y ago
My understanding is that traditional bonds (even high quality / low risk ones) frequently sell off (lose value) in inflationary environments. As mentioned elsewhere it's debatable whether we are actually in an inflationary environment currently.

aynyc 5y ago

Depending on how hard you want to manage your money. 1. Short term: instead of CD ladder, you can do TIPS ladder. 2. Long term: correctly allocated index based portfolio.

tedunangst 5y ago

If you are using CPI as the input to savings decisions, then you should be buying used cars.

JTbane 5y ago

Short-term TIPS or maybe I-bonds? They are pretty solid. Long term has always been stocks.

harambae 5y ago
In a calendar year, you can only acquire $10k in I bonds [0] What do you do with the other couple million you're stuck with? [0] https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_ibuy.htm https://www.treasurydirect.gov/indiv/research/indepth/ibonds...

JohnWhigham 5y ago

I recently took my short term cash and dumped it into some high yield dividend ETFs which are generally the safest stocks out there.

anotherman554 5y ago

It's not complicated, bank account for short term, stock index fund for long term. Short term crypto or stocks if you don't mind gambling and possibly not having the money when you need it.