Financial markets around the world are reeling following President Donald Trump’s latest and most severe volley of tariffs, and the U.S. stock market is taking the worst of it so far.
I have to admit, I don’t know that it’s the best option, but all my funds are currently in a HYSA.
Not as high return as the market under normal circumstances, but it’s liquid, and it’s been relatively safe at between 3.5% and 4.25% the last several years, and the times we live in are anything but normal.
Your funds might be in a HYSA but the bank holding them probably has them in stocks and bonds.
So if the stocks fall enough you won’t have your money anyways.
Now you could say you want to hold onto cash instead, but the only fix for the banks not having money is to print money which makes cash worth less.
Okay but what if you held gold or other minerals. Well the value of those comes from the perception that they could be used to trade when other things fail, but even if milk is $500 a gallon no grocery store is going to take gold as it isn’t able to be insured and tracked. So the value of gold also will drop as it can’t actually be used for goods and services.
So basically you can’t isolate yourself and protect yourself from societies stupidity. Its all a gamble and maybe your option works out or maybe it doesn’t but there isn’t a clear way to avoid the problem.
You are supposed to, but it is only insured to 250k. That might seem like a decent amount but if you suffer inflation and a government that is inclined to decrease FDIC rather than increase, you might end up not really getting much value out of that cash.
As the other poster said, you can have multiple accounts. Betterment, for example, automatically puts money in several banks for you and is thus insured up to $2 million.
To be fair i think times are rarely normal. Just since 2000 we’ve had the dot com bubble, great financial crisis, covid pandemic, ukraine war and now this. Although the current situation feels like a particularly unforced and unnecessary one. And before that there were also plenty of other crisis from world wars, the cold war with things like the cuban missile crisis or the 1973 oil crisis.
HYSA with those rates certainly seem like an appealing place to be in the current market, but as always this is a question about market timing, which is hard to impossible. When did you exit your positions and when do you plan to reenter? Because as said with the recent drops on a wide market scale we are still only down to levels just before the US election and nobody knows how things will play out in the future.
So my point still stands that anyone who is finding himself in acute issues due to the current market changes has done poor risk management. Broad market etfs are meant for a long term investment horizon of 10-15 years exactly so one can weather out downturns. And if someone is close to retirment it would have been prudent to shift some portion of savings into more stable investments similar to how target date funds handle it. Which might still be a good move right now, as the losses are still within reason, assuming a diversified investment strategy (and not something like having bought tesla at peak or the trump meme coin).
When did you exit your positions and when do you plan to reenter?
I never had positions to exit. Was on the struggle bus financially for a long time and even had to declare bankruptcy back in 2013.
I started making more money and finally being able to really save and invest in late 2020/early 2021 but with Covid and everything being all crazy I wasn’t sure of the market as I’ve had no prior investing experience and didn’t even have a 401k. So I started aggressively paying down remaining debts and saving instead.
Currently my only debt is my mortgage, which I should be able to fully pay off (well ahead of amortization) in the next five years or so, and I’m currently living well below my means to save for retirement. Currently I have probably 18 months to two years of expenses in the HYSA.
I was planning to begin investing and putting funds in 401k or a Roth IRA this year, but Trump happened and I’m as lost as ever. I prefer the safe bet of the saving yield right now to potentially losing a ton of money, seeing as the markets are just falling everyday from what I can see.
Sounds like it’s going in the right direction for you financially, that’s great! Depending on the interest rate paying off a mortage is definitely the right call and a pretty good (+reliable) return.
That said i would probably still set up a small savings plan on a broad market ETF. Not because it’s necessarily an amazing time to invest, but to dip your toes into the experience and get a bit desensitized against the fluctuations. Doesn’t really matter the amount really (assuming you can invest without large fees), it just makes a difference psychologically to have skin in the game. That way you have some history once you decide to enter the market with larger sums.
The Covid dip, while certainly unusual, is a pretty good example to why it might be a good idea. Since then there’s constantly been chaos in the world, but you could have invested with the worst timing in 2020 and would now be better off than by sitting on the sidelines. The past isn’t indicative of the future, but on that topic i really like the story of Bob, the world’s worst market timer
It’s good to have 3 months to a year of expenses saved in an HYSA to start with as a rainy day fund you can use in an emergency (i.e. lose your job/house, etc.). I think there are some studies that a huge portion of the population doesn’t have savings to cover even a surprise $1000 expense.
That’s more important than putting money in the stock market to start with but after you have that you can put your savings into an IRA or something preferably in a diversified fund. (Vanguard has a few tgat are specifically targeted for retirement at particular years).
At this point I think I have more like 18 months to 2 years in my HYSA right now. I aggressively paid down my debts and as of January this year my mortgage is the only one left, but I didn’t start having enough to seriously invest until the last few years (maybe 2020 or 2021) and I’ve been aggressively saving since while I figure out where to put the money longer term.
On the bright side, I’m making so much more than I spend that it’s likely I’ll have my 30 year mortgage (27 years remaining) paid off inside of 5 years while still being able to continue saving, and paying the mortgage off will accelerate my retirement options.
Congrats! I would say don’t sleep on the stock market, especially now since a dip/cliff is really the best time to invest to get a good return, but you shouldn’t touch it for at least a decade. Generally over a ten year period the market will give you a rate of return better than a HYSA but may be better or worse across short periods of time.
If there is some kind of economic collapse that happens, it’s going to affect a lot more than the stock market. Even regular bank accounts will be affected and if your bank doesn’t shut down your US currency may be worth nothing. Especially if they get rid of the FDIC like Trump and Musk want.
I have to admit, I don’t know that it’s the best option, but all my funds are currently in a HYSA.
Not as high return as the market under normal circumstances, but it’s liquid, and it’s been relatively safe at between 3.5% and 4.25% the last several years, and the times we live in are anything but normal.
Your funds might be in a HYSA but the bank holding them probably has them in stocks and bonds.
So if the stocks fall enough you won’t have your money anyways.
Now you could say you want to hold onto cash instead, but the only fix for the banks not having money is to print money which makes cash worth less.
Okay but what if you held gold or other minerals. Well the value of those comes from the perception that they could be used to trade when other things fail, but even if milk is $500 a gallon no grocery store is going to take gold as it isn’t able to be insured and tracked. So the value of gold also will drop as it can’t actually be used for goods and services.
So basically you can’t isolate yourself and protect yourself from societies stupidity. Its all a gamble and maybe your option works out or maybe it doesn’t but there isn’t a clear way to avoid the problem.
Banks are insured by the government. If they get rid of the FDIC then I don’t know, but if a bank collapses you still get your money.
You are supposed to, but it is only insured to 250k. That might seem like a decent amount but if you suffer inflation and a government that is inclined to decrease FDIC rather than increase, you might end up not really getting much value out of that cash.
250k is not a very big nest egg for retirement.
As the other poster said, you can have multiple accounts. Betterment, for example, automatically puts money in several banks for you and is thus insured up to $2 million.
No, but you can have multiple accounts and each is insured up to the FDIC limit.
To be fair i think times are rarely normal. Just since 2000 we’ve had the dot com bubble, great financial crisis, covid pandemic, ukraine war and now this. Although the current situation feels like a particularly unforced and unnecessary one. And before that there were also plenty of other crisis from world wars, the cold war with things like the cuban missile crisis or the 1973 oil crisis.
HYSA with those rates certainly seem like an appealing place to be in the current market, but as always this is a question about market timing, which is hard to impossible. When did you exit your positions and when do you plan to reenter? Because as said with the recent drops on a wide market scale we are still only down to levels just before the US election and nobody knows how things will play out in the future.
So my point still stands that anyone who is finding himself in acute issues due to the current market changes has done poor risk management. Broad market etfs are meant for a long term investment horizon of 10-15 years exactly so one can weather out downturns. And if someone is close to retirment it would have been prudent to shift some portion of savings into more stable investments similar to how target date funds handle it. Which might still be a good move right now, as the losses are still within reason, assuming a diversified investment strategy (and not something like having bought tesla at peak or the trump meme coin).
I never had positions to exit. Was on the struggle bus financially for a long time and even had to declare bankruptcy back in 2013.
I started making more money and finally being able to really save and invest in late 2020/early 2021 but with Covid and everything being all crazy I wasn’t sure of the market as I’ve had no prior investing experience and didn’t even have a 401k. So I started aggressively paying down remaining debts and saving instead.
Currently my only debt is my mortgage, which I should be able to fully pay off (well ahead of amortization) in the next five years or so, and I’m currently living well below my means to save for retirement. Currently I have probably 18 months to two years of expenses in the HYSA.
I was planning to begin investing and putting funds in 401k or a Roth IRA this year, but Trump happened and I’m as lost as ever. I prefer the safe bet of the saving yield right now to potentially losing a ton of money, seeing as the markets are just falling everyday from what I can see.
Sounds like it’s going in the right direction for you financially, that’s great! Depending on the interest rate paying off a mortage is definitely the right call and a pretty good (+reliable) return.
That said i would probably still set up a small savings plan on a broad market ETF. Not because it’s necessarily an amazing time to invest, but to dip your toes into the experience and get a bit desensitized against the fluctuations. Doesn’t really matter the amount really (assuming you can invest without large fees), it just makes a difference psychologically to have skin in the game. That way you have some history once you decide to enter the market with larger sums.
The Covid dip, while certainly unusual, is a pretty good example to why it might be a good idea. Since then there’s constantly been chaos in the world, but you could have invested with the worst timing in 2020 and would now be better off than by sitting on the sidelines. The past isn’t indicative of the future, but on that topic i really like the story of Bob, the world’s worst market timer
It’s good to have 3 months to a year of expenses saved in an HYSA to start with as a rainy day fund you can use in an emergency (i.e. lose your job/house, etc.). I think there are some studies that a huge portion of the population doesn’t have savings to cover even a surprise $1000 expense.
That’s more important than putting money in the stock market to start with but after you have that you can put your savings into an IRA or something preferably in a diversified fund. (Vanguard has a few tgat are specifically targeted for retirement at particular years).
At this point I think I have more like 18 months to 2 years in my HYSA right now. I aggressively paid down my debts and as of January this year my mortgage is the only one left, but I didn’t start having enough to seriously invest until the last few years (maybe 2020 or 2021) and I’ve been aggressively saving since while I figure out where to put the money longer term.
On the bright side, I’m making so much more than I spend that it’s likely I’ll have my 30 year mortgage (27 years remaining) paid off inside of 5 years while still being able to continue saving, and paying the mortgage off will accelerate my retirement options.
Congrats! I would say don’t sleep on the stock market, especially now since a dip/cliff is really the best time to invest to get a good return, but you shouldn’t touch it for at least a decade. Generally over a ten year period the market will give you a rate of return better than a HYSA but may be better or worse across short periods of time.
If there is some kind of economic collapse that happens, it’s going to affect a lot more than the stock market. Even regular bank accounts will be affected and if your bank doesn’t shut down your US currency may be worth nothing. Especially if they get rid of the FDIC like Trump and Musk want.