Re:The Impact of Index Investing: A Follow-Up
by ryangittins on Wednesday May 04, 2016 @01:02PM
(#11629732)
The cost of inflation (at, say, 3%) is $30 for every $1k you have in your emergency account. That's $150 per year if your emergency fund is $5k, or $300 if it's $10k.
I'd be surprised if the combination of the effort it takes and the fees that are charged are less than that for your method.
That being said, it's sounds like you have a firm grasp on your system and it works for you. That's much more than can be said for a vast majority of people.
Re:The Impact of Index Investing: A Follow-Up
by ececconi on Wednesday May 04, 2016 @01:59PM
(#11630253)
Cash is a great thing, it's something you don't have to worry about and usually is FDIC insured. Personally, I'm holding onto quite a bit right now because I think much of the market might be overvalued. I think I was just trying to see if I could think out a case where you could in theory not worry about not having too much of it on hand.
Also your example assumes that all the shares were bought at the same time and declined 50%. If you've been investing for years, the value of your gains/losses wouldn't simply be a "market crash" it would include the price at which you bought the stock at plus any dividends you reinvested. So a 50% downturn from a certain high point could be much less from how much capital you initially committed. Add to that you can take capital losses as a way to reduce tax liability in a given year.
There's enough ways to hedge without having too high of a cash drag.