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If you only have a little more than a year in total assets that probably makes sense. But if you have much more than that, there’s no reason to keep an entire
by sarchertech 1y ago
If you only have a little more than a year in total assets that probably makes sense.
But if you have much more than that, there’s no reason to keep an entire year in such a low return investment.
Money in say an S&P500 ETF can be liquid in 1-3 days.
- wenc 1y agoSP500 can go down a lot and stay down for a long time. We went through this in 2022 when most stocks were down 20% for a year. SP500 is not a low risk short term investment. How would you feel if your rainy day fund lost 20% of its value?
- beisner 1y agoI think OP is speaking about people who have 5x or more than their current salary in equities, where even a 50% temporary drop in assets will have no meaningful effect in lifestyle (and a long-term 50% drop in S&P would be apocalyptic, bigger fish to fry).
- wenc 1y agoI think that's a bet that is contingent upon not getting laid off for more than a year during a period when there is 20-30% drawdown. If that happens, then any growth differential between equities and SPAXX's 4% is going to be wiped out -- in which case it was better to have stayed with SPAXX which offers liquidity and modest but stable growth at near zero risk. It's not a sure win rule. A better strategy is to hedge (bet maybe 3 months of your 1 year emergency runway), but that requires some acumen.
- sarchertech 1y ago>A better strategy is to hedge (bet maybe 3 months of your 1 year emergency runway), but that requires some acumen. Yeah that’s what I was suggesting when I said you don’t need keep your entire 1 year emergency fund in low risk investments (assuming you have much more than a year of runway).