4 ms·

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.
      - giantg2 3y ago
        "Inflation risk is not downside risk." "But it doesn’t factor into whether an investment is considered “safe,” as that term is typically used in this context." If you ignore real terms and don't care about actual value (the entire goal of investing), sure. I guess is cash is "safe" too if your ok with losing double digit percentages of your valve over the past 3 years.
        trogdor 3y ago
        This conversation is about the meaning of specific terms, not about whether I care about real investment returns. Of course I care about real returns.

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.
    - giantg2 3y ago
      "Inflation risk is not downside risk." "But it doesn’t factor into whether an investment is considered “safe,” as that term is typically used in this context." If you ignore real terms and don't care about actual value (the entire goal of investing), sure. I guess is cash is "safe" too if your ok with losing double digit percentages of your valve over the past 3 years.
      - trogdor 3y ago
        This conversation is about the meaning of specific terms, not about whether I care about real investment returns. Of course I care about real returns.