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Comment by beambot | Hacker News Reader

What? Let's assume he's intelligent and has good diversification (eg. he mentioned bonds, stocks, home, and cash -- probably in a investment account). If all his financial positions got "wiped out" in a broad-sweeping financial collapse, then "cash in savings" would be equally worthless.

In the meantime, he has a home to live in. Plus, most investment accounts give you easy access for withdrawals (eg. debit cards) or the ability to borrow while transfers or sales settle. I fail to see how it's precarious.

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You're the second person to say this, but how would "cash in savings" be equally worthless? Maybe I'm not understanding, but it's pretty difficult to actually lose money in a savings account, that's the whole point.

He mentioned having some of the funds as "cash on hand." Let's assume it's some sort of investment (eg. sweep) account, like at Charles Schwab [1]. The funds are FDIC-insured, just like a savings account; they are also just as accessible as a savings account. But they are actually an investment account, from which you can trade stocks, bonds, etc.

Of the (mostly affluent) people I know... none of them possess a traditional savings account. Most use a checking accounts for direct deposit and a brokerage account. There's no reason to have a traditional savings account.

[1] http://www.schwab.com/public/schwab/investing/accounts_produ...

Because in diversified portfolio, to loose it all the following must happen. All listed companies must have completely collapsed. Goverment must have basically collpased to loose all value on the bonds.

If that happens its probably the financial amagedden anyway.

If the stock market falls by 50% i still have 70% of my portfolio. I'm OK with that.

Right but these days there's a lot of correlation between assets and all the big moves happen in response to monetary policy. In an environment where everything doesn't hinge on extremely low interest rates I'm in total agreement, but you're really exposed to policy risk in the market right now.

I agree that many assets are now correlated stocks and bonds for example.

But for a bond to go to absoulte 0, would take a lot.

Also I'm not sure that small increases in the interest rates would that much of a disaster. We've been in situations with low interest rates before, and increments in the interest rate didn't harm stocks in the long term.

In many ways it's a positive indicator, that goverments see a positive future.

When the fed announced that the interest rates were on hold. Stocks went down.

There is a lot of lose money in the system though from low interest rates.

Because the set of events that could "wipe away" your (reasonably-intelligently diversified) assets has a large intersection with the set of events that could "wipe away" your saving account in a bank. Things like nuclear war, global pandemic, etc.

Yes, the FDIC does insure savings accounts, but that's only useful so long as the FDIC exists.

I don't agree! I think much worse things would have to happen to dissolve the FDIC than would have to happen to lose a significant portion of your investments in the bond/stock/real estate markets.

> in a broad-sweeping financial collapse, then "cash in savings" would be equally worthless.

> how would "cash in savings" be equally worthless? Maybe I'm not understanding, but it's pretty difficult to actually lose money in a savings account, that's the whole point.

The cash wouldn't be lost, but it would have reduced purchasing power in a recession. And if inflation is steep, you're actively "losing" money.

It would be "worthless" in the context of long-term investing, because nothing would have long-term worth.

Why would the cash have reduced purchasing power in a recession? Sure, that would be the case if there was high inflation, but that certainly wasn't the case with the 2008 crisis.

You have that backwards, during a recession Cash is King. $10,000 in summer 2009 bought you a hell of a lot more of practically anything than the same amount a year previously.

People with cash on hand in 2009 made out like bandits. Cheap stocks, cheap houses, cheap cars. Everything was cheap, cheap, cheap.

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