At 43% marginal rates, that interest would be only $9k.
Hard for me to get excited about bank bonuses, between the work (which is real) and the taxes.
If I were in a 43% marginal tax bracket I would care much less about the interest earnings of my emergency fund and worry much more about counting all the bucks I was making.MoneyMarathon wrote: ↑Thu Mar 26, 2020 4:57 pmAt 43% marginal rates, that interest would be only $9k.
Hard for me to get excited about bank bonuses, between the work (which is real) and the taxes.
The bucketing approach is not wrong, it's just a matter of methodology and lack of clarity.ChrisBenn wrote: ↑Thu Mar 26, 2020 4:41 pmI think keeping the EF as a separate bucket (when it's not a trivial percentage of your retirement taxable assets) makes sense, no disagreement there. I think the 30k as cash, and a retirement horizon AA for the rest is great as a default/baseline.Starfish wrote: ↑Thu Mar 26, 2020 3:42 pmSo the problem is the obsession over AA? AA is a guideline. It should change as your conditions change (and if market changes if you ask me).ChrisBenn wrote: ↑Thu Mar 26, 2020 9:14 amHow would that work if a persons taxable savings was 30k (with a 30 year investment horizon) and their ef was 30k?Starfish wrote: ↑Thu Mar 26, 2020 2:49 amChrisBenn wrote: ↑Wed Mar 25, 2020 5:56 pm
If by AA you mean "allocation I have determined based on risk tolerance, investment horizon, etc" - then that will typically be slated to a retirement goal (at list that's the assumption I'm working with here). The risk tolerance/investment horizon for an EF are probably different.
So now you have to determine what your new target AA should be based on two factors - EF usage, and retirement. It's hard enough to do it based on one - blurring two almost opposing use cases is just going to blur the AA/risk tolerance estimate more.
And, ultimately, if you nailed it, the AA would effectively be the same as your overall (as measured AA) with an appropriate emergency fund + retirement taxable. It actually seems more likely to produce a correct outcome to estimate each independently. At that point averaging them together with a fund size weight gives you your new target AA - but you now should reset that each time you contribute (since the EF is more of a fixed and not percentage allocation).
Or you can just ignore all of that and keep it in two funds; that actually seems much simpler to me?
As mentioned before, if your taxable is so much greater than your emergency fund that the inclusion of the latter doesn't move the needle on desired AA then sure, roll it together (but honestly at that point it doesn't matter much what you do). But for people who aren't at that point the bucketing approach still seems much easier/simpler. (Unless you consider your risk tolerance/investment horizon the exact same for a EF vs. your retirement taxable)
I still don't understand why bother to add stocks to your EF and then inflate it, when you could use a an appropriate risk allocation and use the additional money to add to your main AA (retirement targeted).
What stops your from having a 3 portion AA (stocks, long term bonds and short term investments) and sell them accordingly when the need appears. If one asset is down sell the other... it goes in the direction of rebalancing.
You would have to adjust your overall AA to manage risk - and every time you contribute to your savings (with a longer investment horizon than the ef) you would have go recompute your target aa. If you bucketed the two funds this would happen implicitly.
Once your EF does't move the needle on your savings AA (when the latter is much larger) then that strat is fine if one prefers it - doesn't make a big difference either way at that point.
Is it that hard to have an AA made of 30K cash and 70/30 for the rest? You fill the EF part and then keep contributing to the LT one.
Even the partition EF/LT is also mental accounting. There are 3 asset classes and all of them can be used in an emergency, not only the cash. If I were laid off 3 months ago I would have sold stocks because they were very appreciated instead of using the cash. Now I might use cash because stocks are down.
So then we come to the proposition brought up by vinevize, using a conservative asset allocation for your EF (potentially with slight overfunding to account for volatility) - this could be considered a potential evolution of the the above. There are tradeoffs there, so it's not for everyone, but I think there are valid arguments for it (that were laid out in the op)
My only point of argument with the discussion here (and apologies if I misinterpreted your post) was the notion that it makes more sense to roll some or all of the EF into your retirement AA. For people with a 5 figure EF and 7 figure taxable retirement AA absolutely that's fine. But if you are in the early accumulation stage I believe it's just much simpler to bucket it. Consider a person who wanted a 20/80 AA for their EF (30k), and a 90/10 allocation for their retirement taxable AA (30k). So they start out with 6k equities / 24k bonds for the EF and 27k equities / 3k bonds for retirement. Or 33k/27k. Now their next paycheck comes in, what do they purchase to maintain their AA? As part of the calculations you have to back out the 20/80 (30k) EF portion first. Pretty trivial sure, but just seems pointless you you can keep it in two separate buckets to begin with?
I agree,not a big difference, but I wasn't arguing it was wrong, I was arguing that the bucketing approach wasn't wrong.
This was a decision I was considering. At the amounts I'm working with I preferred the liquidity to 0.15%socialforums2019 wrote: ↑Sun Mar 29, 2020 9:12 am 1. Open 3-4 penalty free CDs @ 1.7% which will protect my interest for 7-12 months
2. Open a few CDs @ 1.85% which will protect my interest for 12 months, but the cash is now locked up
Yes I am a big fan of stocks in taxable, Placing cash needs in a tax-advantaged account, and just making the exchange as the taxable account gets too small for comfort.I am now considering this option where I will take 7 months of emergency funds and place it into VASIX and then the rest in option 1 or 2. I can always put a stop loss @ 10-15% drop to protect the rest of the funds.
I doubt there is a "right" answer to this, but I'd hope you could make some estimate at the time you needed to make the withdrawal about both the size of the need and probability that the emergency would last more than two weeks or so.
That's my thinking as well.Triple digit golfer wrote: ↑Wed Mar 25, 2020 10:04 pm If it's so simple to just hold seven months instead of six, isn't it just as simple or simpler to add another month over every 135 months to keep up with inflation? For someone with $5k monthly expenses, it would require simply cutting expenses by less than $9 per week and always adding it to the fund. That seems much easier than starting with an extra month.
Well, of course that sounds a lot nicer... but aren't you forgetting risk? There is no guarantee that the extra risk will pay off.MoneyMarathon wrote: ↑Thu Mar 26, 2020 12:01 am The comparison would have someone being able to regularly withdraw from an emergency fund if it goes up too much beyond 7-8 months of expenses, which sounds a lot nicer than having an ongoing expense to fund it.
Or, more realistically, you wouldn't have to add as much to it in order to keep up with lifestyle creep, since it grew over time.
This approach is what I also came to except for:HappyJack wrote: ↑Wed Mar 25, 2020 8:38 pm One thought
1. Determine what you set as your EF - this is your “floor”
2. Put that amount in safe vehicles. Don’t stretch for return here. You want safety.
3. Determine your overall AA. Count your “floor” in the fixed income amount. You can then add to both equities and fixed income but always keep your “floor” established.
4. Your “floor” might grow as your family grows.
5. As taxable and tax deferred sides of your portfolio grow keep bonds and fixed income on tax deferred side and you can rebalance to fit your AA over there if you sell taxable equities on the taxable side.
Couldn't you just use a credit card when the markets are closed for trading? What emergencies require physical cash? Credit cards give at least 1-2 months of float.afan wrote: ↑Wed Mar 25, 2020 5:12 pm We hold bonds, including cash, as part of our asset allocation.
Cash in a bank account protects against a big drop in the markets. It also serves as money that is readily available in an EMERGENCY. Not "learned of a need for cash on Friday after the markets close, sell on Monday, wait till Wed or Thurs for the sale to settle and cash available." Cash in a bank account, or some other account that is IMMEDIATELY spendable, is for true emergencies.
It also is accessible even if there is so much disruption that placing a trade and liquidating assets is not the quick and trivial undertaking it is in normal times.
Our immediately available cash is less than 6 months expenses but the asset allocation makes this plus the usually highly liquid fixed income considerably more than that.
Although we could sell stock into a severely depressed market if necessary, we manage unexpected expenses from the cash and short term bond allocation.
Your strategy is sort of what SWAN does (https://amplifyetfs.com/swan) -- 90% in us treasuries, 10% in deep itm spy leap calls. It reconstitutes every 6 months. It does have a .5% expense ratio.SanjiWatsuki wrote: ↑Thu May 21, 2020 12:51 am One idea I had around emergency fund management involved mixing a lot of very low risk assets with a leveraged equities sprinkle tossed in. The basic idea is that leveraged ETFs limits your maximum equity losses better than a 20% stock allocation while also giving similar exposure. I was inspired by this paper on using leveraged ETFs to mitigate downside risk while still capturing upside.
The basic steps would be:
1. Put 3%-10% of a 3x Daily Leveraged equity ETF^1 into your portfolio, sliding scale depending on your propensity to take risk with your e-fund. A 5% holding is pretty reasonable. An example like UPRO seems reasonable in taxable due to its apparently 0.22% tax cost ratio on Fidelity's key stats page.
2. Place 2x the value of the the leveraged equity holding in long Treasuries -- 10% SPTL in this example that has 5% of UPRO.
3. Place the rest in the best extremely low risk liquid vehicle you have access into right now. The best option probably depends on the current rates at the time. Possibilities include:
* CDs
* Short-term Treasuries
* Short-term TIPS (some liquidity risk in a big downturn)
* Short-term AAA/AA municipal bond funds (some liquidity risk in a big downturn)
4. Re-balance yearly.
CDs are an interesting option because, despite being inefficient in a taxable account, the early withdrawal option makes it possible to handle steep unexpected interest rate increases and exchange some accrued interest to lock in a higher rate -- a situation that would hit the long-term Treasury part of this plan.
I think this strategy could get higher returns with lower drawdowns in the long run. It's a little more complex but it really just needs to be set up and re-balanced once a year. That extra re-balance step makes it less set it and forget it, though.
-------------------
All of the strategies discussed in this thread probably also pair nicely with the Fidelity CMA and brokerage options using the overdraft protection via margin. If you had an immediate need for liquidity and can't just put it on a credit card, you could blow straight into margin on your account for cash and then sell your emergency fund assets later. As long as you were only in debt for a short amount of time, the margin cost should be pretty minimal (if you borrowed $20k at 8.325%, you'd pay $4.63 in interest per day until you cleared out your balance).
^1 I think something like a higher % of WisdomTree 90/60 U.S. Balanced Fund (NTSX) would also be a suitable option to get the equity exposure. NTSX might be more optimal because I think they get better lending rates on their leveraged Treasury futures with a much lower expense ratio and they get favorable tax treatment on the Treasury portion.
Yeah, SWAN is similar with similar quirks. Both the leveraged ETF approach and the SPY calls have a chance of dropping to almost 0 very quickly early in the cycle if the market tanks, turning the holding into basically straight bonds. SWAN'll carry more upside capture and more downside risk.ChrisBenn wrote: ↑Thu May 21, 2020 12:29 pm Your strategy is sort of what SWAN does (https://amplifyetfs.com/swan) -- 90% in us treasuries, 10% in deep itm spy leap calls. It reconstitutes every 6 months. It does have a .5% expense ratio.
This is exactly what I'm doing at Vanguard. At Fidelity, I'm using AOK, plus a little AGG to get me to 20%. Got sick of having cash sitting on the sidelines.vineviz wrote: ↑Wed Mar 25, 2020 10:19 am I've said previously that the emergency fund does NOT need to be entirely in cash instruments, just that the household have enough liquidity to persevere scenarios with a reasonable probability of occurring. There are various ways to accomplish this, and one that I think most people should consider as a smarter option is this:
Slightly overfund the emergency fund and invest it in a very conservative balanced fund (e.g. a fund that is 20% to 30% stocks) such as the Vanguard LifeStrategy Income Fund (VASIX).
This makes perfect sense. I see no reason not to invest my emergency fund in 15% or so equities, to help keep a little ahead of inflation. A 50% market decline about result in about a 7.5% decline in my emergency fund. If I withdraw across a miss of stocks, short-term bonds, and cash (which is what I use), then I'm really withdrawing a very small amount from stock if I need it.willthrill81 wrote: ↑Wed Mar 25, 2020 12:36 pmI entirely agree and have made a similar recommendation myself before. Back when we still had an EF of some size (we no longer have a real need for one), we invested 2/3 of it in Wellesley Income fund and left the remainder in hard cash stored securely.
The longest that the NYSE has been closed since WW1 was after 9/11/2001, when it didn't reopen until 9/17/2001.Ferdinand2014 wrote: ↑Tue Jul 14, 2020 9:42 pm What happens if the markets close for an extended period? Is it possible to sell and extract cash from a mutual fund? ETF?
Do you AOK this in a taxable account? Would it be tax efficient outside of a tax advantaged account? Thanks.bck63 wrote: ↑Sat Jul 11, 2020 12:00 pmThis is exactly what I'm doing at Vanguard. At Fidelity, I'm using AOK, plus a little AGG to get me to 20%. Got sick of having cash sitting on the sidelines.vineviz wrote: ↑Wed Mar 25, 2020 10:19 am I've said previously that the emergency fund does NOT need to be entirely in cash instruments, just that the household have enough liquidity to persevere scenarios with a reasonable probability of occurring. There are various ways to accomplish this, and one that I think most people should consider as a smarter option is this:
Slightly overfund the emergency fund and invest it in a very conservative balanced fund (e.g. a fund that is 20% to 30% stocks) such as the Vanguard LifeStrategy Income Fund (VASIX).
Yes, in taxable. I keep my emergency fund in a taxable account. On that relatively small portion of my investments, I don't mind paying taxes. 2.44%, minus taxes (in my bracket), is much better than, say, the Vanguard Federal MMF yield or a high-yield savings account.IowaFarmWife wrote: ↑Tue Jul 14, 2020 10:08 pmDo you AOK this in a taxable account? Would it be tax efficient outside of a tax advantaged account? Thanks.bck63 wrote: ↑Sat Jul 11, 2020 12:00 pmThis is exactly what I'm doing at Vanguard. At Fidelity, I'm using AOK, plus a little AGG to get me to 20%. Got sick of having cash sitting on the sidelines.vineviz wrote: ↑Wed Mar 25, 2020 10:19 am I've said previously that the emergency fund does NOT need to be entirely in cash instruments, just that the household have enough liquidity to persevere scenarios with a reasonable probability of occurring. There are various ways to accomplish this, and one that I think most people should consider as a smarter option is this:
Slightly overfund the emergency fund and invest it in a very conservative balanced fund (e.g. a fund that is 20% to 30% stocks) such as the Vanguard LifeStrategy Income Fund (VASIX).
Thank you. I figured it was in taxable, but I didn't want to assume it was without asking first. I've been looking for a fund like this to park a portion of my EF, and I think you have given me the fund I've been looking for.bck63 wrote: ↑Wed Jul 15, 2020 5:53 amYes, in taxable. I keep my emergency fund in a taxable account. On that relatively small portion of my investments, I don't mind paying taxes. 2.44%, minus taxes (in my bracket), is much better than, say, the Vanguard Federal MMF yield or a high-yield savings account.IowaFarmWife wrote: ↑Tue Jul 14, 2020 10:08 pmDo you AOK this in a taxable account? Would it be tax efficient outside of a tax advantaged account? Thanks.bck63 wrote: ↑Sat Jul 11, 2020 12:00 pmThis is exactly what I'm doing at Vanguard. At Fidelity, I'm using AOK, plus a little AGG to get me to 20%. Got sick of having cash sitting on the sidelines.vineviz wrote: ↑Wed Mar 25, 2020 10:19 am I've said previously that the emergency fund does NOT need to be entirely in cash instruments, just that the household have enough liquidity to persevere scenarios with a reasonable probability of occurring. There are various ways to accomplish this, and one that I think most people should consider as a smarter option is this:
Slightly overfund the emergency fund and invest it in a very conservative balanced fund (e.g. a fund that is 20% to 30% stocks) such as the Vanguard LifeStrategy Income Fund (VASIX).
I don't let the tax tail wag the dog.
IowaFarmWife wrote: ↑Wed Jul 15, 2020 8:10 amThank you. I figured it was in taxable, but I didn't want to assume it was without asking first. I've been looking for a fund like this to park a portion of my EF, and I think you have given me the fund I've been looking for.bck63 wrote: ↑Wed Jul 15, 2020 5:53 amYes, in taxable. I keep my emergency fund in a taxable account. On that relatively small portion of my investments, I don't mind paying taxes. 2.44%, minus taxes (in my bracket), is much better than, say, the Vanguard Federal MMF yield or a high-yield savings account.IowaFarmWife wrote: ↑Tue Jul 14, 2020 10:08 pmDo you AOK this in a taxable account? Would it be tax efficient outside of a tax advantaged account? Thanks.bck63 wrote: ↑Sat Jul 11, 2020 12:00 pmThis is exactly what I'm doing at Vanguard. At Fidelity, I'm using AOK, plus a little AGG to get me to 20%. Got sick of having cash sitting on the sidelines.vineviz wrote: ↑Wed Mar 25, 2020 10:19 am I've said previously that the emergency fund does NOT need to be entirely in cash instruments, just that the household have enough liquidity to persevere scenarios with a reasonable probability of occurring. There are various ways to accomplish this, and one that I think most people should consider as a smarter option is this:
Slightly overfund the emergency fund and invest it in a very conservative balanced fund (e.g. a fund that is 20% to 30% stocks) such as the Vanguard LifeStrategy Income Fund (VASIX).
I don't let the tax tail wag the dog.
Perhaps I'm reading the chart wrong, but if the red (cash CAGR < 0) seems to even out with the blue (cash CAGR > 0) with the vast majority of time being in the white (CAGR ~ 0)...doesn't that mean that cash, in real terms, isn't providing any type of return?Kevin K wrote: ↑Wed Jul 15, 2020 2:32 pm The OP's claim that cash invariably loses money to inflation is incorrect.
And as others have said, this is a "bucket" strategy that's only necessary when your main or "real" portfolio doesn't include cash to begin with. Tyler over at Portfolio Charts has an excellent article that both corrects misunderstandings and shows how worthwhile it is to include cash:
https://portfoliocharts.com/2017/05/12/ ... -investor/
Quoting from the article:
There are three important takeaways...:
Cash is a dynamic asset and the return is not at all fixed
Cash correlates quite well to inflation
Cash does pretty well even in times of rising interest rates
If I were going to pursue a bucket strategy I agree that 100% cash wouldn't be a good choice, but rather than pay a .11% ER to own Vanguard's LifeStrategy Income Fund I'd "roll my own" using 80% VGIT and 20% VTI, cutting the ER by two-thirds and completely avoiding pointless exposure to corporate and international bonds and equities while (with 80% ITT's) having a big dose of downside protection that the Vanguard fund-of-funds lacks.
That chart is for real (i.e. inflation-adjusted) returns. Also, most investors will actually experience lower effective returns due to taxes.Maverick3320 wrote: ↑Thu Jul 16, 2020 12:18 pmPerhaps I'm reading the chart wrong, but if the red (cash CAGR < 0) seems to even out with the blue (cash CAGR > 0) with the vast majority of time being in the white (CAGR ~ 0)...doesn't that mean that cash, in real terms, isn't providing any type of return?Kevin K wrote: ↑Wed Jul 15, 2020 2:32 pm The OP's claim that cash invariably loses money to inflation is incorrect.
And as others have said, this is a "bucket" strategy that's only necessary when your main or "real" portfolio doesn't include cash to begin with. Tyler over at Portfolio Charts has an excellent article that both corrects misunderstandings and shows how worthwhile it is to include cash:
https://portfoliocharts.com/2017/05/12/ ... -investor/
Quoting from the article:
There are three important takeaways...:
Cash is a dynamic asset and the return is not at all fixed
Cash correlates quite well to inflation
Cash does pretty well even in times of rising interest rates
If I were going to pursue a bucket strategy I agree that 100% cash wouldn't be a good choice, but rather than pay a .11% ER to own Vanguard's LifeStrategy Income Fund I'd "roll my own" using 80% VGIT and 20% VTI, cutting the ER by two-thirds and completely avoiding pointless exposure to corporate and international bonds and equities while (with 80% ITT's) having a big dose of downside protection that the Vanguard fund-of-funds lacks.
Yeah, that's what I mean. If the real returns on the chart show effectively zero...I'm not sure if I'm following OP's assertion correctly.willthrill81 wrote: ↑Thu Jul 16, 2020 4:07 pmThat chart is for real (i.e. inflation-adjusted) returns. Also, most investors will actually experience lower effective returns due to taxes.Maverick3320 wrote: ↑Thu Jul 16, 2020 12:18 pmPerhaps I'm reading the chart wrong, but if the red (cash CAGR < 0) seems to even out with the blue (cash CAGR > 0) with the vast majority of time being in the white (CAGR ~ 0)...doesn't that mean that cash, in real terms, isn't providing any type of return?Kevin K wrote: ↑Wed Jul 15, 2020 2:32 pm The OP's claim that cash invariably loses money to inflation is incorrect.
And as others have said, this is a "bucket" strategy that's only necessary when your main or "real" portfolio doesn't include cash to begin with. Tyler over at Portfolio Charts has an excellent article that both corrects misunderstandings and shows how worthwhile it is to include cash:
https://portfoliocharts.com/2017/05/12/ ... -investor/
Quoting from the article:
There are three important takeaways...:
Cash is a dynamic asset and the return is not at all fixed
Cash correlates quite well to inflation
Cash does pretty well even in times of rising interest rates
If I were going to pursue a bucket strategy I agree that 100% cash wouldn't be a good choice, but rather than pay a .11% ER to own Vanguard's LifeStrategy Income Fund I'd "roll my own" using 80% VGIT and 20% VTI, cutting the ER by two-thirds and completely avoiding pointless exposure to corporate and international bonds and equities while (with 80% ITT's) having a big dose of downside protection that the Vanguard fund-of-funds lacks.
If the emergency fund is 50k for 6 months then put 100k in VTSAX in taxable and be done with it?
This idea would mean to me that short term TIPS would be an ideal emergency fund vehicle.KlangFool wrote: ↑Wed Mar 25, 2020 10:59 am OP,
I would offer a counterpoint to your idea.
In my opinion, my cash/cash equivalent serves another purpose besides an emergency fund. It is a separate asset class by itself. It helps/protects me from short-term deflation.
Diversification is a good thing.
KlangFool
For someone who's assets are all in a tax advantaged account, taking an extra large
If you're thinking about holding TIPS in taxable and are interested in deflation considerations, I Bonds might be worth looking at for some people. The main negatives with I Bonds are yearly purchase limits, they can't be sold in the first year, they have a 3 month penalty for selling in the first 5 years, and they have federal taxes since they can't be held in a Roth like TIPS. The main selling points are that they can be tax deferred, currently offer slightly better rates than TIPS, and their deflation considerations amount to 6 month periods.
I felt like it was too complicated. Now I keep my EF in CDs and just count it as part of AA. The key point now is that those CDs will not be used for rebalancing.TexasBorn wrote: ↑Mon Jul 27, 2020 9:17 pmHow do you feel about that decision now 4 months later?
I’m thinking about moving my 1 year’s worth of EF I’ve saved into this same approach...
Wellesley (VWINX) is up 2.77% YTD, definitely better than any high yield savings account.TexasBorn wrote: ↑Mon Jul 27, 2020 9:17 pmHow do you feel about that decision now 4 months later?
I’m thinking about moving my 1 year’s worth of EF I’ve saved into this same approach...
I'm just curious, why 50% Wellesley/50% Cash (which puts you are lets say 18.5% stock overall) instead of 50% Balanced Fund/50% Cash, which would put you around 30%.willthrill81 wrote: ↑Mon Jul 27, 2020 9:28 pmWellesley (VWINX) is up 2.77% YTD, definitely better than any high yield savings account.TexasBorn wrote: ↑Mon Jul 27, 2020 9:17 pmHow do you feel about that decision now 4 months later?
I’m thinking about moving my 1 year’s worth of EF I’ve saved into this same approach...
Blue456 is the one who did it, but yours would seemingly be the only reasonable answer why someone would choose that approach.spdoublebass wrote: ↑Mon Jul 27, 2020 10:59 pmI'm just curious, why 50% Wellesley/50% Cash (which puts you are lets say 18.5% stock overall) instead of 50% Balanced Fund/50% Cash, which would put you around 30%.willthrill81 wrote: ↑Mon Jul 27, 2020 9:28 pmWellesley (VWINX) is up 2.77% YTD, definitely better than any high yield savings account.TexasBorn wrote: ↑Mon Jul 27, 2020 9:17 pmHow do you feel about that decision now 4 months later?
I’m thinking about moving my 1 year’s worth of EF I’ve saved into this same approach...
Is is just the simple fact that you do not want to be exposed to 30% stock and like closer to 20%?
Thanks.
The OP didn't say that. He was merely looking at the backtested difference vs. a cash only EF and couched it as such.
There is no replacement for cash, as March 2020 showed us all.
willthrill81 wrote: ↑Tue Jul 28, 2020 12:36 amThe OP didn't say that. He was merely looking at the backtested difference vs. a cash only EF and couched it as such.
I guess we interpret that differently.It's better than cash, for sure.
but I'd prefer a 3% real return to a 0.8% real return. Can't speak for anyone else.
My DW and I are 30ish years from retirement with an overall AA of 95/5. We recently wanted to save for a vacation and we used a taxable account to buy the fund VTINX (Vanguard Target Retirement Income). I chose this because I didn't mind the 30% in stock and I liked to $1000 minimum purchase.vineviz wrote: ↑Wed Mar 25, 2020 10:19 am
The concept itself if relatively simple: a household should have enough financial capital withstand unexpected shocks (either a period of unemployment/underemployment or a major unplanned expenses) without undue stress.
But boy, are there lots of details there in which the devil can hide. How much financial capital is "enough"? How should that capital be invested? How big are the "shocks"? When will they hit? How long will they last? How much stress is "undue"? And so on.
Yeah. When I saw this post earlier in the year, I decided to do something like this for a small amount of my money. I think I'm still down from my original cash amount. In my case I don't need the money anytime soon but you are better off with cash regardless if it is earning near 0% than investing it and finding out you don't have what you started with and you need it for an emergency.
This doesn't make a lot of sense to me. The market is about where it was at the February peak and up over 30% from the date of the OP. How are you down if you moved cash to stocks?
But the ability to sleep well at night is priceless.
I think technically I am back in the green. I literally bought it within 1 day prior to the drop. On Feb 18. I kind of blocked it from my mind since I didn't need the money and was in my Fidelity account which doesn't have much in it. It was opened when my new company used it for their 401K stuff and I wanted something to replace my prior accounts that kept getting bought by TD Ameritrade.