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Comment by aidenn0 | Hacker News Reader

There was a massive loss in wealth across most asset classes during the last crash without any significant price deflation, so I feel like this is empirically not true.

Yes, if you held cash in 2007, you beat the market, but you weren't wealthier than you were the year before.

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If you sold everything in 2007 and re-bought in 2009 you're substantially wealthier now than you were in 2007. So in that way, cash appreciated (relative to assets) during the crash of 2008.

During that time period the numbers in your bank account didn't get any bigger. But if that were the sole qualification for "increasing wealth" then the folks constantly worried about deflation are totally wrong!

I was using consumer-goods purchasing power as an estimate of wealth. It is obvious that if you can time the market you can make more than if you can't time the market.

However, until someone seriously suggests keeping a significant fraction of your investment portfolio as cash (preferentially to e.g. bonds) as a hedge against market crashes, I don't think it makes sense to classify cash as an investment instrument.

http://money.cnn.com/2013/11/06/investing/wealthy-investors-...

Keeping a significant fraction of your investment portfolio as cash (it's typically actually very short term T-Bills), to buy up assets during a crash is actually something lots of people do.

Weren't you? You could've bought more houses and companies that you could before. I guess it depends how you define wealth but if I can afford 5 houses and 2 companies one year and then 8 houses and 3 companies next year I would think I am wealthier :)

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