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I agree with the math in the article as well as the fact that interest paid on liquid accounts is rather low. The author suggests that higher interest can be r

by Femur 17y ago

I agree with the math in the article as well as the fact that interest paid on liquid accounts is rather low. The author suggests that higher interest can be returned by investing in a domestic stock index. The author ignores one very important concept faced by individuals: risk. It would be just plain stupid for most people to keep an emergency fund in the stock market. At the same time, it would also be stupid for a person to keep long term investments in a low interest savings account. It would be a mistake to conflate these two goals while ignoring risk.

kingkongrevenge 17y ago
A pure cash investing strategy (money market, CD, T-Bill/Bond) now has a track record as good as the US stock market over 30 year periods. Except the much lower volatility of cash makes it superior. Plowing money into stock indexes is for suckers. To get any decent returns one is forced to analyze macro economic conditions and allocate accordingly between cash, equities, and inflation/currency hedges. The article makes this point in different words.
billybob 17y ago
Right. Putting all your eggs in one basket is for suckers. Keep some of your eggs in the fridge. They won't hatch many chickens, but they're unlikely to get eaten by foxes, either. Nothing to see here. Move along.
- kingkongrevenge 17y ago
  That's not what the article says. It says you have to deliberately move your eggs around according to the business cycle.
- kingkongreveng_ 17y ago
  That's not what the article says. It says you have to deliberately move your eggs around according to the business cycle. A pure cash investing strategy (money market, CD, T-Bill/Bond) now has a track record as good as the US stock market over 30 year periods. Except the much lower volatility of cash makes it superior. Plowing money into stock indexes is for suckers. To get any decent returns one is forced to analyze macro economic conditions and allocate accordingly between cash, equities, and inflation/currency hedges. The article makes this point in different words.
  - gaius 17y ago
    Selling your stock at the top of the market then sitting on cash until the bottom before piling back in is hardly the insight of the century.
    - kingkongreveng_ 17y ago
      You will not get reasonable inflation adjusted returns unless you do this to some extent. You cannot get returns without periodically re-balancing between equities, cash, and commodities, and different currencies. There is no free lunch. You can't plow money into a simple "diversified" portfolio and do OK. Yet inflation forces you to play the game or lose.
      - btilly 17y ago
        Do you have evidence for that assertion? Because decades of financial research on the efficient market hypothesis has uncovered evidence that a simple diversified portfolio does very well. A classic incident was a case where a finance professor testified to Congress that if you took all of the stocks, put them on a board, then threw darts to make your selection, with very high likelyhood you'd beat most professional investment funds. (They typically get better returns than the market, but their costs for doing so exceed their advantage, so investor returns come out worse.) One senator couldn't believe this, and so did the experiment with a random selection of stocks listed a decade earlier. He threw the darts, computed the numbers, and his picks beat most professionally managed funds over the same time period! After this was reported he was offered a job on Wall St. You can find the research explained and further details of that incident in A Random Walk Down Wall St.
        kingkongreveng_ 17y ago
        Thanks for CAPM 101. Alpha is hard to get. No kidding. But nobody here is talking about stock picking. I'm talking about diversifying well outside of equities, as harry browne described in Fail Safe Investing, and slightly overweighting asset classes in accordance with macro conditions. > a simple diversified portfolio does very well. It does not, if by simple you mean S&P. A naive equities dominated portfolio does not do well against inflation over any given 30 year period. Please also remember that stock markets did not begin in the "post war era." There's a lot more history. The efficient market hypothesis is the rallying cry of the lazy. It did not take a genius to a be a little overweight commodities this decade. It did not take a genius to re-weight some out of stocks after parabolic moves up in the late 90s. That's all I'm talking about.

by Femur 17y ago

kingkongrevenge 17y ago

A pure cash investing strategy (money market, CD, T-Bill/Bond) now has a track record as good as the US stock market over 30 year periods. Except the much lower volatility of cash makes it superior. Plowing money into stock indexes is for suckers. To get any decent returns one is forced to analyze macro economic conditions and allocate accordingly between cash, equities, and inflation/currency hedges. The article makes this point in different words.

billybob 17y ago

Right. Putting all your eggs in one basket is for suckers. Keep some of your eggs in the fridge. They won't hatch many chickens, but they're unlikely to get eaten by foxes, either. Nothing to see here. Move along.

kingkongrevenge 17y ago
That's not what the article says. It says you have to deliberately move your eggs around according to the business cycle.
kingkongreveng_ 17y ago
That's not what the article says. It says you have to deliberately move your eggs around according to the business cycle. A pure cash investing strategy (money market, CD, T-Bill/Bond) now has a track record as good as the US stock market over 30 year periods. Except the much lower volatility of cash makes it superior. Plowing money into stock indexes is for suckers. To get any decent returns one is forced to analyze macro economic conditions and allocate accordingly between cash, equities, and inflation/currency hedges. The article makes this point in different words.
- gaius 17y ago
  Selling your stock at the top of the market then sitting on cash until the bottom before piling back in is hardly the insight of the century.
  - kingkongreveng_ 17y ago
    You will not get reasonable inflation adjusted returns unless you do this to some extent. You cannot get returns without periodically re-balancing between equities, cash, and commodities, and different currencies. There is no free lunch. You can't plow money into a simple "diversified" portfolio and do OK. Yet inflation forces you to play the game or lose.
    - btilly 17y ago
      Do you have evidence for that assertion? Because decades of financial research on the efficient market hypothesis has uncovered evidence that a simple diversified portfolio does very well. A classic incident was a case where a finance professor testified to Congress that if you took all of the stocks, put them on a board, then threw darts to make your selection, with very high likelyhood you'd beat most professional investment funds. (They typically get better returns than the market, but their costs for doing so exceed their advantage, so investor returns come out worse.) One senator couldn't believe this, and so did the experiment with a random selection of stocks listed a decade earlier. He threw the darts, computed the numbers, and his picks beat most professionally managed funds over the same time period! After this was reported he was offered a job on Wall St. You can find the research explained and further details of that incident in A Random Walk Down Wall St.
      - kingkongreveng_ 17y ago
        Thanks for CAPM 101. Alpha is hard to get. No kidding. But nobody here is talking about stock picking. I'm talking about diversifying well outside of equities, as harry browne described in Fail Safe Investing, and slightly overweighting asset classes in accordance with macro conditions. > a simple diversified portfolio does very well. It does not, if by simple you mean S&P. A naive equities dominated portfolio does not do well against inflation over any given 30 year period. Please also remember that stock markets did not begin in the "post war era." There's a lot more history. The efficient market hypothesis is the rallying cry of the lazy. It did not take a genius to a be a little overweight commodities this decade. It did not take a genius to re-weight some out of stocks after parabolic moves up in the late 90s. That's all I'm talking about.