Yes I would use this definition too but do you think the subject of this thread, who has no investing experience, views cash as anything other than cash?

I think we should be advocating options like these to OP over Cash because he is most likely not aware of all his virtually risk free options

This has turned into a joke. Now we have people suggesting that the OP, who has a 300K mortgage, 100K in savings, makes 6 figures per year, and is on his way to a pension of 85K per year doesn't know what CASH means. Lol.

This is too much. The only thing 100 percent protected is checking accounts, savings accounts, CD's, and money market accounts (up to 250K per account), and Treasuries. To suggest that this guy doesn't understand the difference between having his money in a checking account and a savings account is laughable.

Rates are so low that it doesn't even make much of a difference, even if he had it in his checking account. But of course, he already stated he had it in savings, which normal people would realize means savings account.

Once again, lots of people talking about risk profiles, etc. Risk equals loss. End of story. Obviously, not many here have a firm grasp of what investing is, or what capital preservation is. Most here are just gamblers in stock price fluctuations, and don't have the mindset of a true business owner, which is what is how real investors think.

There are three ways to go. You can invest, and that means that the only thing that matters is to not lose money. You can also speculate, which could include permanent loss of capital. Or you can hold cash, or cash equivalents.

Most offering advice here had all of their money in play when the Dow was at 14,000 in late 2007. This, after knowing that banks were lending 500K to people with no jobs, and allowing them to buy houses with nothing down. When reality took over, and the Dow went to 6,500, and small cap stocks dropped even further, these people were left holding the bag, as they didn't have cash on the sidelines to make some of the greatest buys they would ever see.

Cash is a very powerful tool. That is why Buffett has over 20 billion in Treasuries. You need cash to buy assets when they are on sale. But most of you are much smarter than Buffett. Maybe you should give him a buzz in Omaha and run some of your theories by him.

Plus, financial advisers, as a group, are the world's worst investors. They pretty much all advise way too much diversification into things, that by definition, they themselves have little understanding of. They are always maxed out and fully invested at the top, too. And just like the economists, not a one of them has ever shown a documented history of building wealth over time through the methods they advocate.

People should Google Auction Rate Securities. Many companies went under in 2008 and 2009 because their idiot CFO's chased yield and invested in so-called "cash equivalents" called Auctions Rate Securities. Billions and billions of dollars in losses, and many people got fired for risking their company's cash balance and essentially losing it all when the market froze up. Those CFO's think just like most in this thread. They have no true understanding of RISK.

You said OP should stay in cash until retirement, meaning you don't think he should buy these on sale assets ever....... yep great tool for OP

OP has already differentiated "savings" and CD's in his first post.

Here is where we deviate: If OP kept it in regular savings for the next 15 years, which you suggested, instead of putting it in a 5year jumbo CD for the next 15 years, OP effectively loses what, $32k assuming these record low rates are the same in years 5 and 10?
OP could literally get into a rolling 3month cd with no interest penalty for taking it out early, and earn ~$14k if he ended up keeping it there for 15 years and rates stayed the same (0.5%). This is the difference in value of the absolute minimum advice I would give OP if he indeed wanted to be 100% conservative and 100% "liquid".


If you reread the1kid's responses thus far, he has asked advice for options ranging from extremely safe and liquid (cash, cd's, etc), to illiquid (rental home), volatile (stocks), highly suspect (enter WSOP and pray), as well as starting a new business, for an amount ($100k) that is not part of his emergency savings ($30k) or retirement accounts ($500k in 457 + two expected $85k/yr pensions). I take this, as a whole, to mean that OP has a basic understanding of risk to reward, and whose concerns are more than "principal protection" alone.

Most of the stuff said here is debatable, with plenty of research that can support opposing or different strategies, I am okay with that, am perfectly fine with you advocating a value approach.
Your recommendation was "inaction until education", whereby you could've easily added ~$14k of value with absolutely zero additional risk, (regardless of your definition of "risk").
So I disagree with the risk profile you have assigned to him and I disagree that people who don't understand investing theory should have no position other than cash. I would've voiced these concerns, but the reason I was more critical than usual was because, in my eyes, your advice will cost OP ~$14k if taken literally.

Don't invest unless you have an edge? How does lumping your money into those 5 stocks, or indexing, give you an edge?

Furthermore, the US has only had brief moments of deflation. The only way to combat our deficit is through massive inflation, which is widely accepted in the industry as being very likely once the Fed raises rates in 2014.

Every crash is "different this time around." That's because it is different, and no one saw it coming, hence the crash. We're back at 13,000 and if you listened to your advisor, or as you call them, crook, you've weathered just fine.

Commissions are mainly a thing of the past. Advisor's are now paid on a fee structure, generally 1-2% of your assets they manage. You make money, the advisor is paid more. You lose, their paycheck is cut as well. This is as fair as it will ever get, which is why more and more firms are requiring a fiduciary standards on their new accounts.

Sitting in cash until the retirement is a surefire way to lose 3% on your money year after year. Imagine cleaning out your great grandpa's house. Under his mattress you find an old $100 bill circa 1920. Would you have rather found that, or $100 worth of the DJIA? (if ETF's were to exist back then).

Also, don't invest until you've put "tens of thousands of hours" into learning about investing? Isn't that why we pay the professionals? The 28 year old who has a bull**** job and all the time in the world can most likely pick some great investments because he has all the time in the world to watch the charts. Surgeons, business owners, attorneys, etc don't sit around their office watching their eTrade account because they have real work to do. Simple division of labor. The vast majority of the working class do not day trade their way to retirement. Another way to think of it, if you inherited $20mm, are you throwing it into eTrade or going with an advisor with 30 years experience from a reputable firm?

The reason people DIY is because they havent met the right advisor yet. Furthermore, when we're talking big bucks, as in investing $20-30mm, those advisors have access to investments you'll never have access to. PE, fund of funds, institutional shares.

The safest investment, the only true guarantee, is a US note. Safer than banks/FDIC, money markets, holding cash.The 30 year will keep you up with inflation, but it won't help you retire.

This thread is a joke? You state they don't know what cash means. Then you say: "The only thing 100 percent protected is checking accounts, savings accounts, CD's, and money market accounts (up to 250K per account), and Treasuries." which is dead wrong. Do you know what money markets are invested in? Furthermore, do you realize that the government bailed out FDIC in 2008? Treasuries are the only guarantee.

Risk does not equal loss.

"You can invest, and that means that the only thing that matters is to not lose money." - Dead wrong.

"Plus, financial advisers, as a group, are the world's worst investors." -Advisors are not investors. They offer advice to the investor and let a professional money manager take it from there.

"Most offering advice here had all of their money in play when the Dow was at 14,000 in late 2007. This, after knowing that banks were lending 500K to people with no jobs, and allowing them to buy houses with nothing down. When reality took over, and the Dow went to 6,500, and small cap stocks dropped even further, these people were left holding the bag, as they didn't have cash on the sidelines to make some of the greatest buys they would ever see." - So you saw the crash coming, sold at 14000, and rebought at 6500? Nice.

The bad advice continues. Treasuries equals cash. Savings accounts equal cash. CD's equal cash. Buffett has over 20 billion in Treasuries that pay close to zero. There is a reason that rates are close to zero. Maybe a few of you jokers should call him up and let him know about your investing secrets. He could easily make more than the one percent he is getting now just by indexing. With 20 billion, that is a lot of money. Well, that is why he is Warren Buffett and you are advocating that someone put family money into something they do not understand.

The OP stated he has a child. He also stated he lost a lot of money due to the real estate bubble/scam. He probably put up a lot of money into something that he didn't truly understand, likely after listening to someone like the people in this thread who were bragging about their real estate gains. The same thing will happen to the KNOW NOTHINGS who pump their inflation scenarios. When everybody is on one side, it always goes the other way in the end.

They will not be taking rates much higher for the foreseeable future. There is a lot of debt in the world that cannot and will not be paid back. That means that asset prices will be going lower, and that also means that dollars will then be buying more of those assets, just like 300K in dollars today buys a ton more house than 300K 4 years ago.

I have stated that it is likely that Indexing will leave you better off than cash from now until 15 years from now. I also stated that you would be better off buying Berkshire Hathaway because it will almost certainly outperform cash. Same with Exxon, and a few others. But just because something is likely, does not mean it will happen, and the risk involved is not only financial, but family and mental well-being, as well.

But what many of you simply gloss over, and have no understanding at all of, is risk. You build into your theories automatic assumptions about inflation, and then say that OP is losing money by staying in cash. But if he would have listened to your line of thinking in 2007 or 2008 he would have seen his 100K go to 40K in about a year. Without the bailouts it would have been even worse.

Financial advisers are not like surgeons and other professionals who have real expertise. Show me one of them on the face of the earth who has an investing record anywhere near what Warren Buffett has. Most all of them suggest investments in things they have little understanding in.

OP should take most of this garbage advice and flush it down the toilet where it belongs. He can enjoy his life knowing he has a cash (or cash equivalent) cushion that will provide security for his family. If he listens to you he puts his family at risk for, at most, a few percentage points per year.

I know all of the garbage arguments. With housing, it was "housing always goes up....great investment". With precious metals it is: "the government will run the printing presses, and therefore dollars will be worth less". People like most in this thread used to also tell people to keep their mortgage and not pay it off, even when they had plenty of excess cash, while their mortgage was at 6 and 7 percent. They said that because stocks go up 9 percent long-term then they could invest the difference.

Very lame advice, but the world needs people of all kinds who are willing to throw money into things they don't understand. That creates opportunities for others. For the OP the best advice is to ignore all advice in this thread and keep enjoying your life. Investing is hard, even if the theory is quite easy. Nobody with bad advice in this thread has ever had long-term success growing money, and that is quite obvious.

There you go, OP. Do not listen to another word potleemit or anyone else has said itt. Sorry you wasted your time. I'm sort of confused what the purpose of BFI would be if this became the narrative.


Again, the original poster has explicitly distinguished savings from CD's. You need to pay attention to this when your advice is to "stay in cash", as it is obvious CD's =/= cash in the eyes of OP. Do you understand this yet?

If you bothered to actually read what OP wrote, you'll realize he had money invested during this period, and ended up breaking even from 03-12.
It would be interesting to see how much would be in his 457 today if he had put his money into cash from the beginning, versus the target retirement fund he's currently in, effectively dollar-cost averaging into a passive fund that focuses on asset allocation in relation to investment time horizon (which is also common advice financial advisors would give someone like OP)

What book did you read that came to the conclusion that buy & hold and asset allocation has never grown wealth long term?
I'm finished with this drivel. If you stand by your words
stop being a hypocrite by then offering it.

This is awful. When did anyone ever "see a crash coming"? Since when can economics predict the future and timing? I tell you the answer - never. Also, as far as advisors, you don't know what you're talking about. Advisors don't outperform the index. Sure, they may get lucky, but they have no edge and you're paying them a LOT of money to do it. If you don't believe me, go see what a difference of 1% does to an investment over 30 years and rethink how fair it is to give up 20-30% of your hard earned money to someone who didn't beat the index. Or did you not know that 1-2% could cost you 30%? Maybe you should look it up.

Joke.

I don't get it... isn't this what he said?

Eh. Fees are only an issue in the absence of value. This is a universal concept. Advisors don't advise indices though, they advise people, and the historical return for average investors and do-it-yourselfers are so dismal compared to either index funds or mutual funds that the industry is not going anywhere.
http://corporate.morningstar.com/cf/...torReturns.pdf
http://moneyover55.about.com/od/howt...geinvestor.htm
http://www.thedividendguyblog.com/20...estor-returns/
This thread is also comforting in that regard, with the huge amount of ego and crap being tossed around. Thread should be locked imo.

No, he said no one saw it coming,implying that crashes are ever seen coming. That's why they are crashes.


You're a pretty smart guy. You know this is nonsense. I didn't ask how investors make mistakes - that's a given. I'm asking to show me any statistics that show advisors out perform passive periodical index investing.

Unless you're implying that the average investor can't learn how to do exactly what advisors do, which takes a few hours to learn. We've locked horns over this before, you know my position on advisors, I despise them. They often do what is in their best interest, not the clients, and it annoys the **** out of me whenever a person gives up a % of their hard-earned money for something so trivial. And 30% isn't exactly "Eh".

And why should the thread be locked? Because there is a difference of opinion? There's no ego here, there's an ongoing discussion with people who are adament about their positions.

oh okay, well then I agree with you.
I thought he meant no one really sees crashes coming which is why they occur, and that you guys were arguing the same thing.


Are you talking about IAR's or Registered Reps? Most "advisors" defer actual investment decisions to people on the other side of the business, so there's a couple degrees of separation before you reach the metric you're requesting. I have yet to see a study that quantifies the average return for people with advisors vs people without. I'd like to see it as much as you would I think.
But that's asking a lot. You'd lump in people who have clients in retirement focused on capital preservation, people with clients all in their 20's in mostly equity positions, people in wrap programs, tactically managed portfolios, third party money managers, etc. Large wirehouse clients are going to be in completely different places than the independents and edward jones guys, you know?
There are plenty of studies/polls that show that people with advisors are, by and large, more comfortable with their financial situation at any given point than people without. But that's not what you're asking for.

obviously i disagree with the second part, but anyone can learn how to do exactly what advisors do, yes. some fail, (and I'm surprised how many people can't pass a simple series 6 or 7) but yeah anyone can learn.
again, these numbers are meaningless without context. I don't think an advisor would be of any real value to you specifically, but to people who don't have the time or inclination to learn about all this stuff but still want to improve their financial situation, it is a different story. If the advisor gets a 30% cut on a 200% return that would otherwise never have been realized in the first place, yeah, eh. Would you rather pay taxes on a realized gain or write off a loss? you know what I mean?
and coming from a place of experience, there are advisors who do questionable things, and there are advisors that will act with the clients best interest in mind every time. For the former group, clients do have legal recourse, something they wouldn't have if they did it themselves, watched Suze Orman, or visited a forum and took advice that turned out to be unsuitable.

thread should be locked because it has been completely derailed and is full of unsubstantiated claims & positions being paraded around as if they were fact. OP came on here seeking advice and is instead told not to take anyone's advice by the derailer.

Couple points:

1) Risk relativism is way overblown. Telling people that its okay to be crazy and accept way lower returns so "you can sleep at night" is silly. We should tell these people to correct their psychological views, not enable them to continually make poor financial decisions in the guise of having a unique circumstance.
2) Permanent loss of capital and preservation of capital are just value investor jive that no one understands and keeps repeating. Every company has a complete loss of capital via massive fraud. So pretending that your investments have no chance to "permanently lose" (whatever arbitrary distinction that is) money is either ignorant or dishonest.

Oyah, look at research on equity risk premium. Pretty sure that is why equities make money over cash.

dividend growth companies anyone? companies like P & G, johnson and johnson, mcdonalds, walmart, lowes, that have raised dividends consecutively every year for 25 years+

like mcdonalds has doubled its dividend every 3.5 years since the 70s, it yeilds 3.1% now, so your yield on cost in a decade could be ~25% if ofc it continued to operate in this way

having said tht, its just the kind of stocks i would buy and hold if it was my money.

i dont knw a lot about investing so im not advising at all, just throwing it out there.

Thread should be locked because no one here is discussing the OP's issues anymore it has evolved into a bunch of personal interest dick wagging about who's investment strategy is best blah blah blah, none of it at all relating to OP's situation