On May 12, 4:15 am, jdbs...@[EMAIL PROTECTED]
wrote:
> It seems to me that the general consensus says that it is not worth it
> to try to squeeze an additional 1-2% at the risk of principal loss.
> For the sake of argument, at what point is it worth it? Maybe it
> never is?
I feel that it can worth it to increase your risk to get a higher
yield. But, the odds should be in your favor.
> If one had 100k in liquid savings, would the risk be
> warranted to invest the "non-emergency" portion of those savings in an
> effort beat the normal CD/savings return by using a bond fund or
> similar?
If you only need $80,000 for emergencies, then you can put $20,000 in
whatever investment vehicle you want.
Or, you can invest the $100,000 in an investment vehicle that is
extremely unlikely to go below $80,000.
> Obviously there is a price to be paid for liquidity, and a
> true emergency should be kept in a low risk, liquid savings account.
Your emergency fund only needs to be in liquid investments as long as
the risk is limited.
> There is also a risk in trying to increase yield. But, is there not a
> risk in failing to capitalize on your non-emergency cash flow? For
> example, if inflation is at 4%, and one invests non-emergency cash in
> a CD or savings account that is earning around the same minus taxes,
> that person is losing money, no? I suppose the answer to this would
> be to invest in long term instruments like 401ks, IRAs, etc. However,
> maybe the point of this cash is for a rainy day type fund that isn't
> necessarily emergency but not retirement either. I suppose the cost
> to benefit ratio really isn't in favor of a mid term investment of
> this type, and probably accounts for the fact that many people only
> view investments in terms of short term emergency savings and
> retirement.
Yes to your comments. And, people should be able to tolerate more risk
as they become wealthier.
Financial planners are first going to examine the needs of clients
that can't tolerate risk because a tragic investment can ruin a
person's life.
--
Ron
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