Comment by adamnew123456 | Hacker News Reader

Comment by adamnew123456 | Hacker News Reader

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> That's madness - I can't imagine why they'd do that.

I think your confusion is in assuming that this is something you do rather than it being the status quo that receives no attention.

Up until recently I had about $80k sitting in a HYSA while interest rates on that account dropped like a rock. I only really noticed that after crunching the numbers and figuring out that was much beyond what I would realistically need. It took a few days to figure out what I could do about that given my income and employment situation.

I'm not sure how much of this applies to someone who is natively middle-class, but I find that part of the luxury of having a good income and a minimal lifestyle is just not thinking about money. If that's where your baseline is then you need some other motivation to scrutinize your finances. It comes more easily to me because I find it interesting but I can see someone without that drive just letting cash sit and being satisfied that the number looks big enough.

Here's a motivating way to think about it - if you have $100k in a bank account and you're getting 0 or next to 0 interest, you're effectively paying about $7.5k a year for that bank account in the first year, due to a guesstimate 7.5% long-term medium risk amortised investment return you missed out on.

Due to compound interest the amount you're effectively paying is going to keep going up every year. After 20 years the effective yearly fee you're paying for having that bank account is... $30k a year.

Maybe that $30k a year fee to store $100k is worth if to some people due to the government-backend security of bank deposits... but long term I think the dealer is always winning that game.

People need to learn about interest and compound interest in school.

And this is all before we even talk about inflation further eating into your pile. Money in a bank account is dead money - it'll rot away to nothing.

Can you please give some advice as to how to convert cash savings to a better yield investment? Especially in this current market where it “feels” to me (I am ignorant) that the stock market is artificially high. Maybe start to dollar cost average in to etf/mutual funds, to avoid a bad timing of “shift cash into market at an all time high right before it crashes”? Sorry for the ignorant question but the thought of cash savings eroding quickly while I don’t really know the best plan for it keeps me up at night. Cheers.

The US markets may feel artificially high to you, but a conventional modest-return, low-risk investment account that you can arrange with any high-street investment advisor is going to be extremely broad in their portfolio. The US markets that you think are inflated may comprise 5% or something of it. It'll also be invested in Asia, Africa, South America, and in different industries.

These kind of broad and boring investments always return about 5-10% or something like that a year. Occasionally they go down one year if there's a big bust up, but if you look over a ten year window it's always going up.

So why doesn't everyone invest in them if they're so dependable? Am I selling a get-rich-quick scheme? The reason is they're too modest for most people who are trying to get more like 15%. But those people take more risk - the kind of risk you're probably worried about.

And so why does the bank pay so little interest? Well they're getting that 5-10% from similar modest-return, low-risk investments (well probably a bit less less as they're more cautious)... and pocketing it.

I would recommend you to form a habit of putting some money into investments every month, not because of DCA or whatever investment strategy is the best, no simply because starting small and growing incrementally is a tried and true strategy for everything in life. If things go wrong you can always quit.

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