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..but that's not a reason to give them all your money. I'm curious as to how many people actually keep 90% or more of their total liquid short-term assets in a
by antonius 13y ago
..but that's not a reason to give them all your money.
I'm curious as to how many people actually keep 90% or more of their total liquid short-term assets in a bank. It seems like a basic rule of diversification of never keeping all your eggs in one basket, including the the bank.
- marcomassaro 13y agoWhere should one keep their money besides a bank? Investment vehicles? Somewhere else?
- antonius 13y agoDepends on how you handle your finances and carry risk. If you keep 100% of your short-term assets in a bank and it goes under, under Canadian banking rules (where I'm from), only $100,000 is covered by the government. Same goes with investing all your money into a specific stock, if the stock performs poorly, your net worth takes a hit.
- marcomassaro 13y agoAgreed - so that begs the question: where does somebody who is making 500k or even a million per year keep their money to 1) have it easily accessible for purchasing things and 2) safe?
- sukuriant 13y agoDefine "easily accessible". Does a few days later count? If so, the stock market isn't a bad place for money
- mikeryan 13y agoFDIC insurance is generally on a per-bank basis. You could have multiple accounts across banks each up to $250k. Generally though there's things like Brokerage Accounts etc which offer higher levels of insurance (SIPC) and easy mechanisms to spread monies across several banks and account services (CDARS for CDs and MMAX for money market accounts). At that point hopefully you have someone managing your money wisely to help navigate these kinds of things.
- orik 13y agoAlways have some cash. You'll never know when you'll need it.
- big_maybe 13y agoLike for when you sever a finger in a kitchen accident and the surgeon won't agree to re-attach within the 6-hour window of feasibility unless you pay him up front in cash. (Really happened).
- orik 13y agoYou probably won't ever see this but I'd love to hear this story if you do see it!
- wonderyak 13y agoKeeping money in a bank is 'ok' until you hit the insured limit. 'Safe' stocks (utilities, etc), precious metals and real estate are all nominally safe investments as well.
- this_user 13y agoDepends on what your objectives are. If you would like to increase the interest received on your money, then holding a portfolio of value stocks or an index ETF will outperform your bank account by a large margin over time. This takes very little effort, but will suffer from the occasional (large) drawdown that you have to sit out or this strategy won't work. If your primary objective is capital conservation then buying high quality debt of countries would be a good idea. Singapore or Switzerland are good candidates if you consider it a real possibility that the US could default on its obligations. Otherwise you could hold Treasury bills and roll them over once they mature or you could use an ETF like SHY that holds short-term Treasury bonds. You could also buy precious metals if you are convinced that civilisation is going to end in the foreseeable future. Drawbacks are fluctuating prices and the complete lack of interest payments.
- sliverstorm 13y agoWeren't we talking about liquid assets? I don't count ETF's as liquid. Even if you can buy/sell them freely, have you ever actually tried to take money out of a brokerage? "Liquid" is the last word I would use.
- thedufer 13y agoThe usual eggs in a basket advice doesn't seem appropriate when you have an FDIC-insured basket.
- antonius 13y agoLiving in Canada and under CDIC rules, only $100,000 is covered. Thus, backing up my original post of not putting all your fiat eggs in your bank basket.
- thedufer 13y agoI suppose that's something to worry about, but only for the tiny portion of people for whom more than $100,000 is a reasonable amount of "liquid short-term assets". I don't expect to ever hold more than an emergency fund + float in cash, so that's not an amount I expect to ever exceed.
- mycroft-holmes 13y agoAn FDIC insured basket doesn't do much if a currency is hyperinflated though.
- _delirium 13y agoI would put that pretty low on my list of worries, if your money is in USD or a similarly stable currency, rather than a small one like Zimbabwean dollars or Icelandic Krona. Modest inflation, perhaps even in the low double digits, is a non-negligible risk, but Weimar-style hyperinflation in USD is a fairly negligible risk, much lower than a bunch of other risks I'm exposed to. The last time the annual inflation rate in USD surpassed 100% (which still isn't even hyperinflation territory) was during the Civil War, ~150 years ago.
- poopsintub 13y agoMr. Canada, you can put $100k in one bank then move on to the next. The same basket...with different hens?
- mikeryan 13y agoIt seems like a basic rule of diversification of never keeping all your eggs in one basket, including the the bank. I'm unclear if you're asking how many people keep 90% or more of their total liquid short-term assets in a bank or not. I'd expect most people keep most their short-term liquid assets in a bank since this is usually just their cash on hand. But this is not "all their eggs" considering their long-term non-liquid assets are probably tied up in some sort of retirement vehicles (which are hopefully diversified), and their homes.
- grecy 13y agoIn many countries bank accounts are insured by the government anyway. Usually it's up to a certain max limit like $100k or $250k.