Comment by boplicity

9 hours ago

Cash is safe. Gold is at a record high for a reason. There are still some companies worth owning.

In general, the thing to look at is the level of liquidity in the market. The liquidity is there, but the problem is there's too much uncertainty for many companies to be able/willing to invest, so it mimics a lack of liquidity.

The dollar has really taken a beating though. It has fallen ~11% this year and is predicted to fall another 10% next year. If you're in cash, you're basically betting the market is going to fall over 20% between the beginning of 2025 and the end of 2026.

Cash is absolutely not safe. Between the fx risk and inflation risk out there, cash is losing purchasing power daily.

Gold is interesting because it was a hedge for a long time, but with the recent run up I wonder if it's entering meme territory. Now that it's moving, people are jumping into it.

  • Real estate outside the US is going to be reasonably predictable for a while yet. That's only going to get truly shaky after the baby boomers head into nursing homes in a big way and population decline sets in (the market is absolutely not ready for a glut of supply IMO).

    It would be difficult to lose money on Manhattan or coastal Californian property as well.

Gold is at a record high for a reason.

Generally, ‘this asset is at a record high’ is not a reason to get into it.

Don’t spread this kind of financial illiteracy.

Cash is worse than even the worst observed scenarios of stock market investing.

E.g., cash is worse than if you had bought your whole portfolio with the worst timing possible like right before the 2008 crash.

I calculated this out comparing typical savings account APY with S&P 500 and the break even recovery of the S&P account is 2013, with annualized returns at 7.4% for your investments versus 2% APY for cash. That means your cash account is less than half the size of your investment account by 2024. And this is the worst case scenario with a massive market crash and the entire portfolio purchased at the exact wrong time - very unlikely, most people invest continually over time.

The only purpose of cash is for immediate liquidity.

People who invest in the stock market expect large fluctuations including major market crashes. That risk is baked in to the expectation of long-term reward.

If you need to stabilize your portfolio to prepare to withdraw from it soon and preserve its value, talk to a professional if you don’t know what you’re doing. They probably won’t recommend 100% cash deposits unless you’re literally spending it all this year.