I'm nervous about investing right now - is there an alternative to just sitting in cash?
What's the alternative to just keeping my money in a savings account? I'm thinking of pulling money out of the market but I still want a return on my money.
Answers
312 points
MoresbyChief answered one year ago …
Depends on what your time horizon is. If like me you have a long term horizon (at LEAST 5 years) but are pretty risk averse, you might consider setting up monthly/quarterly payments into a selection of funds/ETFs. This way you average into the market over time and don't need to worry about the market going down - personally the more it goes down the more I'll increase my monthly payments, as I have a very long time view. Usually the best time for investing is exactly the time when people are nervous and don't want to have money in stocks. Most people get into the market when it's going higher, and then sell when it's lower - exactly the reverse of what you should be doing.
However if you have a shorter time horizon - ie you will need your money in less than 5 years - then you may be right to take at least some of your money out of the market, as there is always a chance that the market could trade at lower levels for some time. It really all depends on your time horizon.
2775 points
Oldman answered one year ago …
I think MoresbyChief's answer is "Bang on".
My suggestion is you do a bit of basic financial analysis. If you're working at a reasonably secure job, then a cash emergency fund would be 3-6 mos. expenses. Being retired, I keep at least 3-5 YEARS, worth in short-term CDs and money markets.
There are currency ETFs and you can find some info about them at
http;//www.etf.seekingalpha.com/article/31129
advantages = low minimums, and ability to trade quickly
disadvantages = trading costs
There are foreign currency FDIC -insured CD's at EverBank,
advantages = can get 3 mos or 6 mos or roll a basket of currencies that appreciate vs. U.S. dollar
disadvantages = no guarantees of performance and relatively high minimum deposits (2,500- 20K)
Another possibility is to investigate the new "social-lending" scene.
advantages = you can deposit small sums and split the amt/loan, so default risk is low; interest rates of 6% to more than 15%
disadvantages = about 6% of loans default.
3963 points
MNSL answered one year ago …
MoreBychief and Oldman have given some good points. I like to add some more.
We should be in the market all the time if we want to get advantage in every opportunity.
Only exception is when we are close to retirement it is better to keep more cash.
I think the current market is driven by speculation. There are more report coming out promoting their products recently. We can see fluctuations almost everyday. Therefore I think we should consider fundamental factors when we try to invest in current market.
At the moment some assets, stocks and commodities are over priced. So we have to be very selective.
312 points
MoresbyChief answered one year ago …
You might also consider putting some money in the Chinese Yuan. I think it's a fairly low risk place for spare cash, and is moving at between 10-15% per year appreciation right now and has been increasing steadily since 2005. Good chance that this will continue for another 12-18 months or so, but some believe it is as much as 40% undervalued still.
As it's controlled by the Chinese government though, there are always risks that they could pull the rug out from under you. So be careful.
265 points
MaverickInvestor answered one year ago …
Cash is absolutely not the place to be! There's around 16% more dollars around now than there was a year ago - your government is inflating it's way out of the current mess, and that means your savings are falling in real value.
I'd also be nervous about China. It relies heavily on Americans consuming the stuff they produce and export, and if Americans are being forced to tighten their belts, then China will suffer.
For me, covered calls and a managed forex fund - that'll do nicely!
546 points
warren answered one year ago …
Great answers all, and Mav has the most important point yet that the currency is losing value as you sit on it. I would not keep cash unless I was waiting to buy something. T-bills preferably cdn would be better than cash then at least you are not losing as much purchasing power. Short term 3month bills would be the place in my mind roll them over if you wish but every three months you decide if you want to get into the market or stay in T bills.
Personally this is the most undervalued compared to the large caps I have seen the smaller gold and silver stocks and they WILL SOAR in years to come and start within the next few month. But that is not for everyone and it can be very confusing when just starting out there...I remember them days, I felt so overwhelmed. Time heals that feeling and I feel more secure now when they are going down or flat than when they were going up since I understand them more.
Good luck and safe trading
Warren
www.preciousmetalstockreview.com
2775 points
Oldman answered one year ago …
Someone else asked a similar question, (with reference to holding 50% of a portfolio in a short-term bond mutual fund).
There's another possibility = Treasury Inflation Protected Securities (TIPS)...but not the ones from the U.S., but from a basket of countries with strong currencies (so you can avoid depreciation). If you go to http://etf.seekingalpha.com and type
International TIPS
in the search bar you will find commentary and info on ETFs that hold FOREIGN inflation-protected bonds.
