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Comment by runako | Hacker News Reader

I think you're implicitly doing an asset allocation for the poster.

> Cash on hand or it's invested in stocks, bonds and my home.

That could be $100k on hand in checking, $600k in stocks/bonds, and $200k in home equity, with $0 in a savings account. Asset allocations that don't use savings accounts are not necessarily 'precarious'.

Also, it's worth noting that most financial advisors do not recommend that you keep a significant portion of your assets in savings accounts. Primary reason is that by not being in assets that deliver returns, you are losing money to inflation, even at these low levels of inflation. (Also, you have to save a ton more if you don't let your money multiply.)

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You are, as far as I know, entirely correct. I still think the survey was designed specifically to find these people who exist in this manner, and I think your criticisms are valid when placed against the thrust of the survey.

everytime someone says that, I always think of a great quote by Nouriel Roubini:

"asked whether he invests in stocks, he replied, "Not as much these days. I used to have a lot in equities—about 75%—but over the past three years, I’ve had about 95% in cash and 5% in equities. You’re not getting much from savings these days but earning 0% is better than losing 50%."

[1] https://en.wikipedia.org/wiki/Nouriel_Roubini

Since June 2009, when that interview was conducted, the S&P500 has more than doubled, not including dividends, so I hope he switched back or he did, in a sense, "lose" 50%.

Counter point:

Numerous financial experts assert the current valuations within the stock market do not reflect the underlying fundamentals; or, in other words, ZIRP allows for cheap debt in the bond markets which many firms are using to aggressively buy back stock, thereby artificially inflating the market value. Thus, "a correction" is due and his statement is still valid from a conservative investing standpoint.

This is hindsight bias. The markets could have easily went the other way. Market timing is notoriously futile. If you want to play "what if?" and pick arbitrary dates then he could have as easily put his cash position into equities lets say beginning of October 2008? Then his advice would seem very wise indeed.

I agree, market timing is futile. Roubini is unwise not because he lost money, but because he believed he could time the market. Mountains of evidence suggest that the RoR on stocks is positive and higher than that of lower-risk assets, Roubini claimed that the opposite was temporarily true. This is a good example of an attempt at market timing that failed.

Even if he'd done that he would be better off than using a savings account.

http://dqydj.net/sp-500-return-calculator/

Picking arbitrary dates to buy a lot of equities and then not selling them isn't market timing; trying to trade repeatedly on the right dates is. That's how you lose all your money.

> "Fame and Fortune: Nouriel Roubini" Times Online, June 21, 2009

Nouriel Roubini lost 260% gains + dividends between 2009 and today. So... I wouldn't really count on this guy's advice at all.

that is very true, but a lot of people that couldnt afford to lose money lost that and more (percentage wise) in between march - sept. 2008. Your best bet is to put money in vanguard index funds targeted for your ideal retirement year and check it once a year - but for people that are trading single stocks/options/.etc, i think Roubini is right - he is also 55 so he is and should be a lot more conservative than someone that is in their early 20s/30s

Really bad advice. The stock did stupidly well after that.

When the market goes down, you can still hold. Or you can sell before the bottom. I was playing in the market in 2008, I got out after the down lost about 2000. Paid off all my debt, got back in at lower prices! Worked great.

I also have $1 in my savings account.

Other commenters weigh in with excellent counters. However, the OP (and I) didn't split between equities and cash.

It would have been very rare for one to have -- while trying to be prudent -- constructed a portfolio of assets across checking accounts, equities, bonds, and primary residence that saw anything like a 50% loss from peak to 2008-crisis trough.

Note that the checking account loss was 0%; bonds did not perform as badly as equities; and in the vast majority of the US, residential RE did not fall 50%. Also note that if one did not choose the absolute generational bottom to liquidate the entire portfolio, the actual losses would have been lesser still. In other words, allocating across a diverse set of assets would have protected from the worst of the downside (while letting you participate in the historic run in equities since).

Irrational fear of volatility is going to have a lot of people retiring much later than they would like, with less money than they would like.

>most financial advisors do not recommend that you keep a significant portion of your assets in savings accounts.

This, of course, depends entirely on the individual and their circumstances.

Obviously, if you're planning on using 85% of your assets in the very near future, that's an exception.

But in general, if your financial advisor suggests going 95% cash for the long haul, you should probably get someone else.

I have less than "recommended" (depending on who you ask) in an emergency fund (but I do still have one). Why? I have a spouse with a large income and it is doubtful crisis will hit us both at once. I also can reduce my spending without a problem in the short term - most of my spending isn't fixed expenses it is experiences that can be curtailed very easily. Someone with a large mortgage may want to keep more in their emergency account - that's all I'm saying. Age has a lot to do with it also - if you are young you can ride out large dips in the market.

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