Good piece on Bill Gross today which I largely agree with; key pull quote for me is "capitalism cannot function efficiently at zero-bound rates".
http://uk.reuters.com/article/uk-funds-janus-gross-idUKKCN10...
Good piece on Bill Gross today which I largely agree with; key pull quote for me is "capitalism cannot function efficiently at zero-bound rates".
http://uk.reuters.com/article/uk-funds-janus-gross-idUKKCN10...
Save up that 6 months of expenses, and each year keep adding to it to make up for the "evaporating" amount. An extra $1000-2000 a year should be more than enough.
Move the money into a CD ladder, which has a better opportunity for keeping up with inflation, once you're more comfortable (about 1 year's worth of savings). You effectively risk 1 year (but the cost of breaking a CD open early isn't that bad if worst comes to worst). You put your money into 4xCDs at 3, 6, 9 and 12 months. As each comes to maturity you bump them to 12 months. So every quarter you have one quarter worth of expenses accessible. Keep 3 months worth of expenses in your checking account to ride out the wait for the first CD. Now you actually have 15 months of savings. A single, competent tech worker can easily achieve this after 3 years, probably earlier, outside high cost of living areas.
I have roughly six months worth of expenses in cash, that I could go take out of the bank right now should something happen. I'll be fine as long as the remainder is somewhere I can get to (some of) it within six months -- and it is.
> That assumes decent real returns on investment, which I'm not convinced really exist any more without taking on more risk than many are comfortable with.
I can't see anything right now that isn't at bubble levels based on the expectation of zero interest rates continuing forever everywhere. Maybe they will, but I think at that point you're gambling rather than investing, and gambling doesn't appeal to everyone.
I actually do believe that the US is in for serious contraction due to the unsustainable infrastructure and development patterns. I'm hanging out in the market anyway, because the federal reserve and misplaced public trust in municipal bonds will kick that can decades further down the road before we ever face the facts.
Until then, I know that I don't have the forecasting ability of large banks, so I play the game with the only advantage I've got: patience.