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Comment by simplecomplex | Hacker News Reader

Where else would I keep it? In the stock market where it can disappear overnight?

Where do you keep your savings?

I would suggest researching how to invest your savings, otherwise it's being eaten away by inflation, and there is no savings account that has enough interest to match that rate currently.

It's harsh to say it, but that statement is a demonstration of your ignorance.

I see this a lot online, but this is not good advice. Savings are meant to provide liquidity in an emergency. If you have $20,000 in a savings account, you can walk to an ATM and withdraw some of that immediately. If you have $20,000 locked up in mutual funds, well... you’d better hope your rainy day has some lead time.

Investing is great. Put $10,000 in something diverse and passive and sit on it. But also keep a savings account for immediate emergencies, and keep some cash on hand for even more immediate emergencies.

Yes, that is called an emergency fund. I didn't want to go into a big explainer of how a typical pre-tax & post-tax index fund savings brokerage works + cash emergency fund in savings works to a random on the internet while there are many other better resources out there.

I can wire money out of my Vanguard (mutual funds) account before 4 PM today and it will be in receiving bank tomorrow mid-day.

I can withdraw money from my ETrade or IB margin accounts using the debit card that came with those accounts (or write a check on them), same as you can with a savings account.

I do keep a few thousand at a local bank and have a separate checking account at USAA that I use for most daily/monthly transactions, but that's for convenience not access/liquidity reasons.

What emergency requires $20K in less than a week? A kidnapping?

The number was illustrative. If it helps, feel free to imagine a different one.

Losing 2-3% per year is better than losing 10/20/30 % or god forbid >50% of your savings - which you cannot recoup.

It depends on what they are saving for - if they need the 20-30K a year down the line it is alright to keep it in the savings account.

If it is for general long term asset building - may be they haven't yet figured out how best to start investing. Again no harm to keep it parked till you figure it out instead of investing in haste and then regret later - for the rest of your life.

I know people who have been sitting on the sidelines afraid to invest in what must be the tail end of the longest bull market we've ever seen.

One in particular has been sitting on the sidelines since before the 2016 election season. They have foregone about a 50% gain that they'd have gotten over that period. That money also can never be recouped.

https://awealthofcommonsense.com/2014/02/worlds-worst-market...

It’s not a gain unless it’s realized.

If one owns a stock and the price goes up 10% they don’t make any money. They would have to sell to make money.

At some point “Bob” needs to retire, hopefully that’s not during a downturn.

Yup. You’ve got it right. I am far more interested in preserving capital than chasing returns at this point. So keeping it parked while using it to capitalize cash flow from businesses and real estate is more to my liking than making one giant bet on an index fund over 30-40 years. Don’t get me wrong I’m not knocking index funds they have their place.

May be you can start with small steps to test the waters. Amount that you are ok to lose in an extreme event. Which might cause you some inconvenience but not great distress. Perhaps 5-10% of your savings in equities. Watch how you repond to the market swings (both up and down) and factor that in for your future investments.

This kind of thinking is creating a dangerous bubble at this time

Thanks for providing insults rather than enlightenment.

Though I am not there yet, the Permanent Portfolio [1] makes sense to me. The key insight is that for the money you have lost, you can never recover the energy/time/life you have spent in earning it. So, capital preservation (wrt inflation) is more important than chasing higher returns - which frankly are not under your control.

[1] https://www.amazon.com/Permanent-Portfolio-Long-Term-Investm...

This is the loss aversion fallacy. (The irrational belief that losing something you already have is worse than losing a chance to getting something you don't have yet.)

You can never recover the time you spent earning money to make up for missing investment gains.

This is not a fallacy, and certainly not an irrational belief :). It is a very rational response to things you have no control over.

May be this needs some elaboration. For me, the low probability event of blowing up your life's worth of saving beats the ephemeral gains you would expect to get from a higher risk investments, every single time. For me, it is irrational to think otherwise, something I can't understand why people do. I will invest in the riskier investments only so much as I am comfortable to lose completely.

And there is the rub, with the modern banking systems, it is very difficult to achieve that unless you use real hard assets like gold which is becoming difficult, real estate which is quite illiquid.

Is one missing out on potential gains ? Perhaps, but one is ok with that.

P.S >> You can never recover the time you spent earning money to make up for missing investment gains.

I didn't quite understand this. The investment gains are not certain or guaranteed. You talk as if they are a certainty.

You could also take a look at portfoliocharts.com, which shows you how that and other portfolios have worked out over the past 50 years, in both the US and Japan. You can play around with your own variations too.

The PP does pretty well at limiting drawdowns. A variation that works especially well is the "Golden Butterfly," which just takes the PP and weights a little more towards stocks. In my own experiments on the site, I've found it also helps a lot to include international stocks, and weight towards small value.

CD, T-bills, bonds?

Also, the stock market doesn't disappear overnight.

In a savings account.That way if the checking account gets compromised, the majority of your money are safe. A common way for a checking account to be compromised is for someone to steal the debit card associated with it. That way is has access to most of your money. There are withdraw limits that kind of limit the impact of such scenario, but you can still loose plenty of money. Also, money associated with a debit card are your own money, so if you loose them the bank can not do many things, in contrast to credit cards, where they can cancel transactions.

The main idea is to keep separate accounts for "everyday life" and savings.

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