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What's a relatively safe way to park my savings?

Eddie Dane

Philosopher
Joined
Aug 18, 2007
Messages
6,681
I have some money in index funds.

But as everything is at record highs, I'm not making much, Trump overstimulating the economy and starting trade wars, I'm thinking of getting out for a while and research some good opportunities.

I'm learning technical analysis and want to start choosing my own stock instead of just sitting in a huge diversified index fund.

But what to do in the meantime?

I could just keep it in Euros. Or diversify and get an account that allows me to keep multiple currencies (Dollars, Swiss Francs).
Or I could put it in government bonds.

Trump is scaring the **** out of me, and here in the EU, the lack of coherent immigration policies are driving voters towards the populist right in many countries. These all happen to be "Euro-skeptic" and that is also scaring the **** out of me with regards to the Euro.

What's a relatively safe way to park my savings?
 
Beating a market portfolio is difficult, some would say it only happens with chance, the way to de-risk it is to hold risk free assets as well. There isn't much evidence that you can make excess profits out of studying market prices the so called "weak form of market efficiency" theory rules that out.
 
I'm learning technical analysis . . . .
Well stop doing that and you have a better chance of safely investing your money.

If you don't want to use an index fund you could always make up your own portfolio of blue chip stocks instead. Just do your own research on each stock. Gold or silver could be a small part of your portfolio if you are really worried about currencies.

FWIW I doubt that you can do much better than your index fund - especially if you believe that the Trumpocalypse is on the way.
 
FWIW I doubt that you can do much better than your index fund - especially if you believe that the Trumpocalypse is on the way.

Actually, that gives me an idea...

Eddie Dane, give me all your money. If the Trumpocalypse happens, I'll give it all back to you, plus whatever interest I earn on it in the meantime. If the Trumpocalypse doesn't happen, I'll keep it all for myself.
 
All depends on how much money you have. If you have enough to put a few thousand dollars on about 10 firms then you should explore the idea some more. Otherwise leave it in an index stock.
 
If you're looking for relative safety, put it in short-term government notes and bills. You'll get a crappy return, but it is the safest investment if you fear a significant bear market in equities. Obviously make sure the notes and bills are denominated in your currency (Euros?) so you don't run any forex risk.
 
I have some money in index funds.

But as everything is at record highs, I'm not making much, Trump overstimulating the economy and starting trade wars, I'm thinking of getting out for a while and research some good opportunities...

No expert, but for long term investment, real estate has always been good to me. Like all else, you need to research and learn the local ropes, but if you can invest for the long-term, rather than short-term turn around, physical property is a limited commodity, and over time, can provide significant positive ROI while accumulating value.
 
I have some money in index funds.

But as everything is at record highs, I'm not making much, Trump overstimulating the economy and starting trade wars, I'm thinking of getting out for a while and research some good opportunities.

I'm learning technical analysis and want to start choosing my own stock instead of just sitting in a huge diversified index fund.

But what to do in the meantime?

I could just keep it in Euros. Or diversify and get an account that allows me to keep multiple currencies (Dollars, Swiss Francs).
Or I could put it in government bonds.

Trump is scaring the **** out of me, and here in the EU, the lack of coherent immigration policies are driving voters towards the populist right in many countries. These all happen to be "Euro-skeptic" and that is also scaring the **** out of me with regards to the Euro.

What's a relatively safe way to park my savings?


Safe is one thing. An opportunity for growth is another. The safest investment would probably be a low-cost fund that buys Treasury securities. TIPS theoretically will at least keep pace with inflation. But for long-term growth the general recommendation is stock funds.

If you start doing tricky things with individual stocks, you have to ask yourself whether you are smarter and luckier than the brokers and fund managers who do it full-time, with vast corporate resources behind them.

Warren Buffett famously bet a hedge-fund manager that over 10 years, the returns of an S&P 500 index fund would beat their hedge funds. He won handily.
https://www.investopedia.com/articl...etts-bet-hedge-funds-year-eight-brka-brkb.asp
 
What's a relatively safe way to park my savings?


The safest way is insured government bonds. None of the things you mentioned are remotely safe. Currency speculation has to be one of the riskiest ways to invest.
 
My retirement (superannuation) fund returned 10% in the 2016/17 financial year, and an average of 7% over the past 25 years. I have no idea how they do it (although I suspect mining and bank shares have been huge contributors) and I hope the fund managers are well paid, but I’m very glad I simply don’t have to worry about it.

And yes, I know a catastrophic year can wipe a lot out, but I think I will leave things in the hands of the pros.
 
My retirement (superannuation) fund returned 10% in the 2016/17 financial year, and an average of 7% over the past 25 years. I have no idea how they do it (although I suspect mining and bank shares have been huge contributors) and I hope the fund managers are well paid, but I’m very glad I simply don’t have to worry about it.

And yes, I know a catastrophic year can wipe a lot out, but I think I will leave things in the hands of the pros.

I'm pretty useless financially, Mrs Don manages the Don household finances. I recently "found" an index fund that I had invested in back in 2014 - I got an email from them highlighting that my cash balance had dropped below the minimum level required to pay the management fees.

I logged on, and found to my delight, that the index fund had appreciated 80% in the last 4 years. Being an index fund, it is not actively managed (they just need to keep a holding in the same proportion to the related index or indices).
 
Beating a market portfolio is difficult, some would say it only happens with chance, the way to de-risk it is to hold risk free assets as well. There isn't much evidence that you can make excess profits out of studying market prices the so called "weak form of market efficiency" theory rules that out.
Completely untrue as usual.
Eddie should assuredly consider technical analysis.
 
Completely untrue as usual.
Eddie should assuredly consider technical analysis.

I have a measure for people I trust with my money: Whose portfolio would I prefer to have as my own? Francesca wins this round. Hands down.
 
The evidence is strongly in favor of sticking with an index fund, even the pros rarely beat the market and then its mostly by chance.
 
Warren Buffett famously bet a hedge-fund manager that over 10 years, the returns of an S&P 500 index fund would beat their hedge funds. He won handily.
https://www.investopedia.com/articl...etts-bet-hedge-funds-year-eight-brka-brkb.asp

Index funds are good. There's really no reason to pay money for some "expert" to try to beat the market, or to pay high expense ratios for some hand-picked mutual fund. These guys survive mostly on chance and survivorship bias.

You really ought not be making decisions based on short term changes along the way. Determine how long you plan to hold the investment before you cash it out (retirement, college fund, house dowpayment, etc) and adjust your risk based on that timeline, not the daily news.

If you're holding for a long time, ups and downs are to be expected. Time in the market is much more reliable than trying to time the market. Here's an interesting thought experiment about Bob, the worst market timer:

http://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

The jist of this scenario is that even if Bob invested at the worst possible times (right before a significant market downturn), if he kept his money in the market, he still had a respectable amount for retirement.
 
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The evidence is strongly in favor of sticking with an index fund, even the pros rarely beat the market and then its mostly by chance.

That's true if you think the market is largely going to behave.

Eddie Dane is concerned that the market is going to crash as a result of President Trump's trade policies and the effect that will have on the market. If the market drops 25% then so do the index funds (which still may outperform other funds that do even worse). It sounds like Eddie Dane wants to pull his money out of the index funds - keep it somewhere safe - and then when the dust settles possibly reinvest it.

Of course that poses a lot of questions.

It could be that, over the next 6 to 12 months (or longer) the market goes up so much that even after a severe correction, you'd still have been better off leaving the money in there than taking it out right now. Daddy Don did something similar in 1998 with some investments because he thought the market was a bubble. It was and burst 2 years later but he may still have been better off leaving it in the stocks he had.

Likewise with the reinvestment. When do you get back in the market ? Is a 20% drop the time to get back in, or are we only half way to a 40% drop. Is the rise the market beginning to recover, or merely a "dead cat bounce" ?

Timing the market well is impossible IMO and so a reasonable course of action if one is investing (as opposed to speculating) is to put money in regularly so that the market fluctuations are reflected in the buy in price.

Going back to Eddie Dane, there is always a trade off between security and return. Depending on how much money he has invested he could put it on deposit in a bank and as long as the amount is less than that guaranteed by the deposit guarantee schemes the money will be absolutely safe but will likely depreciate somewhat in real terms. Government bonds may be very marginally more risky (or a lot more depending on the government, but let's assume a developed world government in good standing) but may even give a small real terms return.

Any investment in any market, commodity or currency will carry a higher level of risk which can be mitigated to an extent by diversification. That said if the expectation is that all markets will tank, diversification may have limited success and if the sums involved are comparatively modest (a few tens or hundreds of thousands of Euro) then the fees involved in a widely diversified portfolio may soon eat into the capital.

My personal view is to keep money in the market and to keep on investing even if there is a significant correction. If absolute safety is important then 100,000 Euro in each account in banks which do not share a banking licence would on way forward - but over time the value will depreciate in real terms - or invest in high quality government bonds which if done across currencies may also provide a currency hedge.
 
That's true if you think the market is largely going to behave.

Eddie Dane is concerned that the market is going to crash as a result of President Trump's trade policies and the effect that will have on the market. If the market drops 25% then so do the index funds (which still may outperform other funds that do even worse). It sounds like Eddie Dane wants to pull his money out of the index funds - keep it somewhere safe - and then when the dust settles possibly reinvest it.

Of course that poses a lot of questions.

It could be that, over the next 6 to 12 months (or longer) the market goes up so much that even after a severe correction, you'd still have been better off leaving the money in there than taking it out right now. Daddy Don did something similar in 1998 with some investments because he thought the market was a bubble. It was and burst 2 years later but he may still have been better off leaving it in the stocks he had.

Likewise with the reinvestment. When do you get back in the market ? Is a 20% drop the time to get back in, or are we only half way to a 40% drop. Is the rise the market beginning to recover, or merely a "dead cat bounce" ?

Timing the market well is impossible IMO and so a reasonable course of action if one is investing (as opposed to speculating) is to put money in regularly so that the market fluctuations are reflected in the buy in price.

Going back to Eddie Dane, there is always a trade off between security and return. Depending on how much money he has invested he could put it on deposit in a bank and as long as the amount is less than that guaranteed by the deposit guarantee schemes the money will be absolutely safe but will likely depreciate somewhat in real terms. Government bonds may be very marginally more risky (or a lot more depending on the government, but let's assume a developed world government in good standing) but may even give a small real terms return.

Any investment in any market, commodity or currency will carry a higher level of risk which can be mitigated to an extent by diversification. That said if the expectation is that all markets will tank, diversification may have limited success and if the sums involved are comparatively modest (a few tens or hundreds of thousands of Euro) then the fees involved in a widely diversified portfolio may soon eat into the capital.

My personal view is to keep money in the market and to keep on investing even if there is a significant correction. If absolute safety is important then 100,000 Euro in each account in banks which do not share a banking licence would on way forward - but over time the value will depreciate in real terms - or invest in high quality government bonds which if done across currencies may also provide a currency hedge.

I'm going to agree with The Don and push back on the OP's central assumption: that anybody can market time successfully. And I mean *anybody*.

I have made literally millions of dollars over 30ish years of investment, on a working class salary, no inheritance or windfalls. My one strategy was to stay fully invested in low managed cost index funds and no more than five select individual stocks that I identified as value at the time of purchase (AAPL in 1997 for example). I held through 1987, 1991, 2001, 2008 and have no regrets.

It's not just a matter of knowing when to get out - history shows it's even *more* important to know when to get back in, and I've never seen a successful tactic for any of this. Only people who got lucky.
 
The best investment is in people. But what kind of people? Well, they ought to be people-persons, the type who are friendly and get along well with others. But since this is business, they should also be good at making money. The sort of person savvy enough to monetize their personality, which in this case is friendly. Friendly people, making money from being friendly. And you come into the picture by setting up these friendly people with people to be friendly to, for a cut of the money. Perhaps you have a place for the friendliness, or perhaps you just monitor from your vehicle. The money should come rolling in. It's amazing nobody's thought of this before.
 
I keep most of my money in S&P 500 tracking index funds. My serious emergency fund, for if I need more than what I keep in cash is in diversified municipal bond funds. Muni bond funds are relatively safe if they aren't all from one place and you get tax breaks. They won't grow like an S&P 500 fund but it's a good balance between safety and return.
 
Index funds, and maybe some small amount of bonds seem like the safest? I'm no pro, though. As an aside, you should check out the Phil Ferguson show if you're into podcasts. It's basically a weird combination of finance and Atheism. I like the finance part the best, but it's all good. He gets good interviews usually for the atheist part.
 
Index funds, and maybe some small amount of bonds seem like the safest? I'm no pro, though. As an aside, you should check out the Phil Ferguson show if you're into podcasts. It's basically a weird combination of finance and Atheism. I like the finance part the best, but it's all good. He gets good interviews usually for the atheist part.

Eddie Dane is looking for a safe haven after pulling out of index funds - on the grounds that he thinks the markets will tank so while I agree that represent low risk (because of diversification) and low cost (because typically they are automatically managed), they are still an investment in the market.
 
I mean, there's always CD's, T-bills, and other super safe, low return options available. You'll probably lose out more trying to time the market than you would if you just took the ups and downs as they came.
 
I mean, there's always CD's, T-bills, and other super safe, low return options available. You'll probably lose out more trying to time the market than you would if you just took the ups and downs as they came.

I tend to agree, but Eddie Dane is of a view that the market as a whole is over-valued and wants to park the money for a time while he researches alternatives.

In that case the things you mention would appear to be ideal.
 
No expert, but for long term investment, real estate has always been good to me. Like all else, you need to research and learn the local ropes, but if you can invest for the long-term, rather than short-term turn around, physical property is a limited commodity, and over time, can provide significant positive ROI while accumulating value.

In hindsight, my investment in rural land and suburban rentals, has, at least on paper, nearly tripled my initial investments over the last five years (and this only includes property bought within the last five years and still currently held). I know that is beggared by the returns some have made in money and stock markets, but I only dabble in such as I lack the expertise and don't trust those who have the expertise to have my best interest in their minds when they act.
 
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