6 ms·

I don't see any reasons not to put everything into diversified ETFs. Low risk, reliably comparatively high returns unless the world economy or the entire US eco

I don't see any reasons not to put everything into diversified ETFs. Low risk, reliably comparatively high returns unless the world economy or the entire US economy crash (which would ruin the value of almost every asset anyways).

dannyw 3y ago
Your emergency fund shouldn’t be in stocks.
dageshi 3y ago
What you suggest is comparatively high risk vs tbills and MM funds. T-bills are literally the safest possible investment bar none.
- giantg2 3y ago
  "T-bills are literally the safest possible investment bar none." Wouldn't I bonds be safest? They protect against inflation.
  - tallanvor 3y ago
    You can only buy $10k worth of I-bonds per year. But you're correct that I-bonds are designed to prevent you from losing money.
    - giantg2 3y ago
      Most people don't have $10k a year to invest anyways.
    - naniwaduni 3y ago
      You're still taxed on nominal gains on I bonds, so in principle you're still exposed to potential downside up to your tax rate. The way rates are set on I bonds is also unusually subject to tracking error.
  - trogdor 3y ago
    “Safe” in this context generally refers only to downside risk. T-bills are safer than I-bonds because T-bills are short-term investments. I-bonds have an early-withdrawal penalty. (I-bonds also have a $10,000 annual purchase limit, but that’s less-relevant.)
    - giantg2 3y ago
      You're missing that Tbills have inflationary risk.
      - bombcar 3y ago
        You also have TIPS available, but I-bonds are better than TIPS (you can tell because I-bonds are limited per person, TIPS are not). If you bought (or even buy) I-bonds at the right time, it can be a spectacularly good deal.
      - purpleblue 3y ago
        T-bills have short duration so their inflationary risk is minimal.
        giantg2 3y ago
        At the lower end, sure. 52 weeks can still be an issue.
      - trogdor 3y ago
        No, I am not. Inflation risk is not downside risk. Inflationary risk is the risk that inflation will undermine an investment's returns through a decline in purchasing power. Downside risk is the risk of loss in value of an investment due to a decline in the price of the security. Decline in value of an investment because of a decline in the price of the security is not the same as decline in value of the investment because of inflation. Even if the practical consequence is the same. Inflationary risk matters, and it should not be ignored. But it doesn’t factor into whether an investment is considered “safe,” as that term is typically used in this context.
padolsey 3y ago
Part of that diversification is the money markets, no?
lr4444lr 3y ago
If you have a high likelihood of needing the cash in the next 0-24 months, that risk isn't so low.
yodsanklai 3y ago
What low-volatility ETFs strategy would you recommend? let say my goal is to survive inflations and market crash such as 2008 for instance. Personally, I have a very hard time putting all my hard-earned savings on ETFs which can lose a lot of their value overnight.
- dmoy 3y ago
  I wouldn't recommend using stock ETFs for an emergency fund. SGOV is a reasonable option, it's basically just doing a 1-3 month Treasury ladder for a charge of 0.2%, and slightly less frustrating liquidity. (So right now you'd get like 5.2% with SGOV, vs 5.4% with treasuries)
  - dannyw 3y ago
    BOXX is more tax advantaged.
coryfklein 3y ago
Frankly I do this as well. I think it depends on your personal financial situation and how often you expect to be withdrawing from your emergency fund. By increasing levels of "emergency", do you use your emergency fund to pay for: * Gas because you forget to plan properly for road trips? Keep your funds in cash. * Your vehicle's regular oil change which happens every couple years and you should be able to plan for? Maybe a HYSA * Your transmission goes out and you need a new car? Diversified ETFs probably fine Many "emergencies" can in fact be saved for, which leaves only the truly rare and uncommon ones, which usually don't require that you have all of the emergency fund available as cash at a moment's notice. Also because they inherently only happen on a time scale of YEARS, then in the long run you're just self-insuring yourself and it's a bummer if the transmission goes out in a down year and you have to exit a position, but statistically speaking you'll come out ahead.

dannyw 3y ago

Your emergency fund shouldn’t be in stocks.

dageshi 3y ago

What you suggest is comparatively high risk vs tbills and MM funds. T-bills are literally the safest possible investment bar none.

giantg2 3y ago
"T-bills are literally the safest possible investment bar none." Wouldn't I bonds be safest? They protect against inflation.
- tallanvor 3y ago
  You can only buy $10k worth of I-bonds per year. But you're correct that I-bonds are designed to prevent you from losing money.
  - giantg2 3y ago
    Most people don't have $10k a year to invest anyways.
  - naniwaduni 3y ago
    You're still taxed on nominal gains on I bonds, so in principle you're still exposed to potential downside up to your tax rate. The way rates are set on I bonds is also unusually subject to tracking error.
- trogdor 3y ago
  “Safe” in this context generally refers only to downside risk. T-bills are safer than I-bonds because T-bills are short-term investments. I-bonds have an early-withdrawal penalty. (I-bonds also have a $10,000 annual purchase limit, but that’s less-relevant.)
  - giantg2 3y ago
    You're missing that Tbills have inflationary risk.
    - bombcar 3y ago
      You also have TIPS available, but I-bonds are better than TIPS (you can tell because I-bonds are limited per person, TIPS are not). If you bought (or even buy) I-bonds at the right time, it can be a spectacularly good deal.
    - purpleblue 3y ago
      T-bills have short duration so their inflationary risk is minimal.
      - giantg2 3y ago
        At the lower end, sure. 52 weeks can still be an issue.
    - trogdor 3y ago
      No, I am not. Inflation risk is not downside risk. Inflationary risk is the risk that inflation will undermine an investment's returns through a decline in purchasing power. Downside risk is the risk of loss in value of an investment due to a decline in the price of the security. Decline in value of an investment because of a decline in the price of the security is not the same as decline in value of the investment because of inflation. Even if the practical consequence is the same. Inflationary risk matters, and it should not be ignored. But it doesn’t factor into whether an investment is considered “safe,” as that term is typically used in this context.

padolsey 3y ago

Part of that diversification is the money markets, no?

lr4444lr 3y ago

If you have a high likelihood of needing the cash in the next 0-24 months, that risk isn't so low.

yodsanklai 3y ago

What low-volatility ETFs strategy would you recommend? let say my goal is to survive inflations and market crash such as 2008 for instance. Personally, I have a very hard time putting all my hard-earned savings on ETFs which can lose a lot of their value overnight.

dmoy 3y ago
I wouldn't recommend using stock ETFs for an emergency fund. SGOV is a reasonable option, it's basically just doing a 1-3 month Treasury ladder for a charge of 0.2%, and slightly less frustrating liquidity. (So right now you'd get like 5.2% with SGOV, vs 5.4% with treasuries)
- dannyw 3y ago
  BOXX is more tax advantaged.

coryfklein 3y ago

Frankly I do this as well. I think it depends on your personal financial situation and how often you expect to be withdrawing from your emergency fund. By increasing levels of "emergency", do you use your emergency fund to pay for: * Gas because you forget to plan properly for road trips? Keep your funds in cash. * Your vehicle's regular oil change which happens every couple years and you should be able to plan for? Maybe a HYSA * Your transmission goes out and you need a new car? Diversified ETFs probably fine Many "emergencies" can in fact be saved for, which leaves only the truly rare and uncommon ones, which usually don't require that you have all of the emergency fund available as cash at a moment's notice. Also because they inherently only happen on a time scale of YEARS, then in the long run you're just self-insuring yourself and it's a bummer if the transmission goes out in a down year and you have to exit a position, but statistically speaking you'll come out ahead.