Cash is a terrible long-term investment, even at 5% interest

Meet with PWL Capital: calendly.com/d/3vm-t2j-h3p
With a 5% return on cash, why would anyone want to invest in stocks? I know that cash feels good because its nominal value is stable - it feels safe, but it is counterintuitively extremely risky for long-term investors.
Referenced in this video:
Reaching for Yield: Evidence from Households - papers.ssrn.com/sol3/papers.c...
CRASH BELIEFS FROM INVESTOR SURVEYS - www.nber.org/system/files/wor...
Who Should Buy Long-Term Bonds? - www.aeaweb.org/articles?id=10...
Portfolios for Long-Term Investors - academic.oup.com/rof/article/...
Presidential Address: Discount Rates - onlinelibrary.wiley.com/doi/1...
Long-Horizon Losses in Stocks, Bonds, and Bills - papers.ssrn.com/sol3/papers.c...
“Buy the Dip” - www.pwlcapital.com/resources/...
------------------
Follow Ben Felix on
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Follow the Rational Reminder on:
- Twitter: / rationalremind
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Visit PWL Capital: www.pwlcapital.com/
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------------------

[@davidk2158]

I’ve always appreciated the plain Jane format of these videos. No explosions in the thumbnail or meme cuts (I’m takin to you Stephan graham). Just straight researched advice for grown ass adults. Thanks for the continued uploads over the years.

[@ThePowerExcess]

I get it, i love simplicity and hate gimmicky YT video stuff. These videos have substance. But i am a professional Quant working with these things and I still have trouble keeping up because of how "flat" the video is. The video is excellent but, some graphics to help convey the concepts would do wonders. I am a visual learner, and keeping track of all the numbers and examples is really not helping with my following.

[@dominikthibault5902]

as always, this is a great rational reminder for every DIY investor. This is by far the best financial channel I know

[@GasparKazarian]

I see what you did there 😉

[@simondelille6863]

The podcast is even better!!

[@tiagosantos680]

Because this channel is focused on offering pure value education, not focused in selling you courses, get rich quickly schemes/dreams. There are few like this, Ben Felix, The Plain Bagel, Patrick boyle, we can probably count with our hands vs the majority spammy/poor quality/sales channels

[@AurelioPita]

100%

[@PajamaJazama]

Im jealous that you haven't found out about Patrick then

[@victoriaabott]

I feel investors should be focusing on under-the-radar stocks, and considering the current rollercoaster nature of the stock market, Because 35% of my $270k portfolio comprises of plummeting stocks which were once revered and i don't know where to go here out of devastation.

[@AmithKaury]

Safest approach i feel to tackle it is to diversify investments. By spreading investments across different asset classes, like bonds, real estate, and international stocks, they can reduce the impact of a market meltdown. its important to seek the guidance of an expert.

[@Jamesjerome0]

A lot of folks downplay the role of advlsors until being burnt by their own emotions. I remember couple summers back, after my lengthy divorce, I needed a good boost to help my business stay afloat, hence I researched for licensed advisors and came across someone of utmost qualifications. She's helped grow my reserve notwithstanding inflation, from $275k to $850K.

[@kurtKking]

This is definitely considerable! think you could suggest any professional/advisors i can get on the phone with? I'm in dire need of proper portfolio allocation.

[@Jamesjerome0]

Actually its a Lady. Yes my go to person is a 'MICHELE KATHERINE SINGH'. So easy and compassionate Lady. You should take a look at her work.

[@kurtKking]

Thanks for sharing. I curiously searched for her full name and her website popped up after scrolling a bit. I looked through her credentials and did my due diligence before contacting her. Once again many thanks.

[@alphamale2363]

Cash is still preferable to panic selling stocks at the bottom of a bear market.

[@floopsiebraadsie5638]

Only if you need to buy lunch though

[@sprintmiles]

Very important video. Not simply because it illustrates the drawback of holding long-term assets in cash, but because it wonderfully assuages concerns over short-term moves in borrowing rates for long term holders, i.e., higher expected returns offset present value declines in asset values for long-term investors.

[@JeredtheShy]

It's a good time to make sure your emergency fund is big enough, with a nice bonus from the interest rate to encourage you. But that money is going to sit there because it's an investment in your short term daily security, and that is its return. If you have the emergency fund you need, then listen to the man.

[@DentalTech1000]

Excellent advice, as usual. I'm 70 years of age, though, so in my case cash is not a long-term investment anymore. I'm 45% in stocks.

[@richardshipe4576]

Congratulations on hitting 70! I hope I make it that far.

[@angelocesar4303]

From Brazil, I watch all videos. Thanks Ben.

[@DeepDiveDiscovering]

Another great video Ben! Doing your followers a great service. Thanks big shooter

[@michaelhoward3916]

the chuckle at the end made me laugh... good video as always.

[@doneiliragaba1266]

Man It is very kind from you to Provide this free on KZbin, will be forever be Grateful, Financially you’re inspiring.

[@Zilero]

Very timely advice, thanks Ben. I just had a family member ask about this, so I’ve been wondering about the data.

[@montyburnz]

This video is completely aimed at me. Thanks for the insight.

[@2am_k]

Also HYSA has ordinary income tax. Could hold stocks for long term or dividend to save on taxes too.

[@user-vp8kt7il1n]

Excellent video!!! Thank you!🎉

[@bernhardklinger4839]

What a wonderful video, thank you very much!

[@TXLionHeart]

I view the delta between the expected return on the market and the 5% as a relatively cheap option premium that can be exercised when the expected returns increase.

[@dusanzSk]

Great video Ben. However, when you mentioned long term return cash vs other alternatives, is it based on the average market conditions, right? Do you think we are near average now? I would be curious to know, what would the data tell you if you compare the returns starting in market with comparable PE or Schiller PE? Would not holding mostly cash during such times and switching to stocks otherwise, give better results?

[@BenFelixCSI]

Thanks! CAPE is high for the US market. Much less so elsewhere, and even parts of the US market, like US value, look pretty cheap. The data I talked about in the video is global and covers all kinds of market conditions from 1890 to 2019.

[@Woj_Poznanski]

I like the Rational Reminder podcast and I love your solo videos. Great job as always.

[@Skilliard]

How does the inverted yield curve play into this, though? Historically, bonds usually pay more than cash due to the interest rate/duration risk premium, but currently this is not the case. We can get 5.5% on cash, but 10 year and 30 year US treasuries only pay about 4.2%. So for bonds to outperform, short term interest rates would need to drop and average below 4.2% over the next 10-30 years.

[@Telencephelon]

Also what about it's sibling: the perverted yield curve?

[@connoross13]

This should be addressed

[@greg5892]

Good point!

[@RobertAllen943]

Add to that a 1 % advisor fee and you are at even less.

[@acecool1715]

Thank you for spending your time to provide these wonderful knowledges

[@redoxhydra]

Just the question I was wondering. Thanks Ben!

[@SmrdiTiBabka]

I love how I quite never understand the middle part of Ben's videos, but it sounds like he knows what he's talking about, so I believe him and act accordingly. 😂

[@Unknown-jt1jo]

Ha, same here! The middle part is where he gets into the technical details that I lack the background to fully understand.

[@veilsoul3092]

thanks to you I now realise I also don't understand when it's technical part but still agree to it anyway... i now feel dumber than i already am...

[@Martin-jm8wi]

Why did you write this comment? Now, I realized I also don't understand it and have to watch it again....

[@mangoman9290]

I think Ben was going to buy us lunch, something like that anyway

[@tioswift3676]

Nice. The “oh, they seem informed and they’re nice so dadgummit I believe them”never hurt anyone ever in the history of humans 😂😂

[@pistopit7142]

Just amazing. Thanks.

[@mohamedchikhaoui2463]

Excellent video, as always of course

[@AAkCN1]

Superb as always

[@TheAdnanSakib]

What if I need more liquidity and short term cash because say I'm trying to buy a house within a year, do I put it in HYSA, CD?

[@BillyCarsley]

I was given $250 in savings bonds for my 10th birthday. When I cashed them at 30 year maturity, they were worth less than they were initially due to inflation.

[@smileychess]

What year was it and what was the ending balance?

[@BillyCarsley]

@@smileychess it was like 1988 to 2018.

[@smileychess]

@@BillyCarsley - What was the ending balance?

[@BillyCarsley]

@smileychess $250 became like $400. It lost to inflation, because money more than halved value in that time period.

[@Dizzydizzydizzy7]

That's the goal of inflation; constantly make past earned money worthless so that the masses continue to work forever

[@ratantropo]

Brilliant analysis. Thanks a lot.

[@davidsaomi6493]

Great video! I was wondering what your opinions are on time diversification, i.e. the idea that stocks become less risky as you increase the holding period. It seems to be a controversial subject among academics. I've read articles that argue time diversification doesn't make sense and that it might also depend on how you define risk: the probability of losing money vs. how much money can be lost.

[@BenFelixCSI]

Measured by the variance in wealth there is only time diversification if returns are mean reverting. I think they are a little bit mean reverting. Measured by the probability of losing there is time diversification even if there is no mean reversion.

[@davidsaomi6493]

@@BenFelixCSI Thank you!

[@thomas6502]

Thank you Ben!

[@denisgurbuz4186]

great content as always

[@dumbcat]

it depends on how old you are. if you are in the final 15 or 20 years of life you might not be able to afford a big drawn down and the stress of a big draw down. you might prefer to lose a little money holding something relatively safe even if it cannot keep pace with inflation

[@greg5892]

In my understanding, cash still wouldn’t be the way to go here. Increasing allocation to bonds in your portfolio is key when approaching retirement for reducing volatility and hedging against downturns when not concerned with growth.

[@Joonabobo]

Ben, thank you for the great videos. Do you happen to have any videos on 100% stocks vs. stocks+bonds vs. possibly all weather (dalio), in the context of a retirement fund? (30+ years runway). Thank you!

[@BenFelixCSI]

I don’t. Not a fan of all weather for any purpose. This paper finds that 60/40 is optimal for safe withdrawal rates at the 30-year horizon papers.ssrn.com/sol3/papers.cfm?abstract_id=4227132

[@Immabeast714]

Thank you for the video Ben! I have been thinking about this exact topic over the last few months wondering if my investing was still the best option.

[@curtis507]

What program or templates do you use for your text and graphics?

[@paulnolan843]

Ben, I'd love to hear your opinion regarding Equal Weight ETFs. Whether they actually generate long-term alpha compared to traditional market cap index funds.

[@TheDividendInvestorCPA]

Great video my friend- Always stay invested 👍

[@TheSpinBlue]

Should address more about whether the role of bond fund in the investment is replaced by cash (@ 2-5% interest rate)

[@thaboog]

Ben, do you have a video on quality as a factor? If not, would you consider making one? Seems like they should do well in the current environment.

[@fritz4573]

Yeah, completely depends on the purpose of that investment. I have my emergency fund in Tbills. However, that is an emergency fund or money I will use in the next few years for a down payment.

[@fritz4573]

@@Anonymous-ld7je Yeah, you’re right I should have clarified. This is the second tier emergency fund. I do have an emergency fund that is cash it’s just not as large.

[@valourus]

Good video as always. I did move my emergency fund to a higher yielding bank account, in EUR earning 2.56% :) does feel good

[@sleepless2541]

3:30 "long term inflation indexed bond prices", so TIPS?

[@antoniomanguartpaez6381]

Hi ben, do you think this applies in all countries? In Mexico for example interest rate of cash is 11.25% and inflation is around 5% Seems to me that is very difficult that I would get a better deal in stocks ... at least in the short term

[@PoisonedSnowx]

You have to consider political risk and exchange rate risk. Remember third world countries are more volatile and do unexpected things. Loop up the Tequila Effect. My parents lived through that. Something like that would never happen in the US

[@pabloaguilar6342]

So for short term, for current contributions would it be fine to have the treasuries or hy bonds?

[@slickvik4508]

So I know groups of stocks and bonds are much better than cash but what about a single one? If you had to pick putting a significant amount of money into a somewhat volatile tech stock or pure cash what would you pick?

[@jenkins5265]

This channel is for real investors who care about actually learning about investment vs the youtube sensationalism where videos are made for clicks and views. I can't praise enough the format of these videos. No hyperbole, just facts and research that is actually sourced and cited, delivered in a way that is accessible and understandable. Wish every channel were like this.

[@anita.b]

Fun fact, real investors do not need to "Learn" anything and aren't on KZbin looking at any of those channels. They are family offices with 10s or even 100s of staff working there managing obscene amounts of money in the billions that ACTUALLY generate profits. Anyway enjoy your 1200USD huge win this quarter, I am sure you're on your way to being a multi-millionaire.

[@jenkins5265]

@@anita.b Well, that's your perspective but I believe in lifelong learning. It's not about "huge wins" but the process of investing for me, understanding fundamental investment principles, research/analysis and I appreciate the information Ben provides. It's great insights in an accessible, free format that saves me hours of reading and research if I were to do it myself. I will also add that part of the problem with people not understanding the language of finance is this "ivory tower" perspective you seem to have, where institutional investors are the only ones who should be investing. Recent history would show otherwise. But what would I know? I'm just a fan of diamond hands. You lose 100% of the races you don't run/give up on. Cheers.

[@robinimpey101]

Ben Felix, did you make this video just for me! Very timely, thank you!!! Scotiabank is going to be upset with you if I empty our savings account! 😄

[@1996paulo1996]

Excellent video Ben. I would like to know your opinion in cash ETF for emergency funds. Thank you for sharing your knowledge

[@flammmenspeeryt9184]

When a friend asks me anything: hold on, I gotta see if Ben made a video about it before I say nonsense 😅

[@thecorrectoification]

This video is terrific and timely as usual. I would never swap out my stock portfolio for cash. Although I am in the process of switching my emergency savings from EQ Bank into Motive Financial for their 4.1% savvy savings rate. I used to ponder about using a short-term treasury bond fund for my emergency savings, but I didn't like the illiquidity. Same thing for GICs(and cashable/redeemable ones have lower rates). I think those 4-5% HISA's are perfect for emergency fund as you said.

[@adrianbulfon8430]

I love Motive as an emergency fund HISA. I use it for my tax money as well.

[@WillPlaysTheDrums]

This was a fantastic explanation

[@JustinDuhaime]

OK. Cash < Bonds. What are your thoughts on gold relative to those?

[@susymay7831]

Good video.

[@zizogazzizo3015]

Thank you Ben, great analysis as usual. What do you consider to be long-term? Some of the trends you show are for over a century, I understand how that would be long term. But in terms of a person's investing horizon, how do we apply this advice? Thank you

[@BenFelixCSI]

Thank you. Someone asked me this on Twitter so I looked at the data. Around the 10 year mark is where the 10th percentile outcome for stocks starts to look better than the 10th percentile outcome for cash in terms of real payoffs.

[@abberantgeck0]

I have 10% sitting in cash @ 5%. I use the interest to rebalance my long term assets. It feels good. Psychology is half the battle for me.

[@healthygrowth7760]

How do you get return on your cash?

[@Glanzern]

@@healthygrowth7760 High yield savings account. Most only will give you at least 4.3 currently.

[@zf1786]

HYSA or CD/share certificate probably@@healthygrowth7760

[@abberantgeck0]

Money market fund@@healthygrowth7760

[@joshmeadows6210]

@@healthygrowth7760certificate of deposits or high yield saving account

[@lucaaa88]

I would like to see something about the correlation between money supply and SPY ...

[@danhworth100]

What do you think about this specific moment with interest rates hitting home owners in our (Canada’s) housing heavy economy. I just sold some shares to have some cash 😅

[@kimappreciateslife]

All depends if your still working or retired. Also your age & your current cash needs…. Also depends on how much money you have. If you have many many millions, and a simple lifestyle, hoarding cash is not a big deal if it makes you feel safer.

[@youtubetim3577]

Finally someone gets it, subscribed

[@joannk5259]

What is considered long term? Anything above 1, 2 or 3 years?

[@aba1829]

What is going on in 5:13? The line with interest has one data point less than the equity and bonds. How is this a legit chart?

[@AustinMathias]

Straight forward, and no bull. I like you Ben

[@michaelsmith4904]

While you talk about an emergency fund, what about funds that are intended for something else, like purchasing a new home? We have had a lot of cash sitting around for a couple years and may for a couple more because we are saving it to purchase our next house, but exactly when that will be is hard to pin down. At the same time, like you mention, the purchasing power of that cash is eroding, but at the same time how can you invest in anything risky something that you intend to eventually use it for without going outside the short term time horizon (hopefully)?

[@oddassembler]

Can you give some examples of these worldwide total ETF things you keep mentioning. I think the naming convention would vary by provider and country and I cant seem to find one or one I am confident is the correct product

[@Shvabicu]

In Europe most long term ETF investors invest in total market index ETFs based on the MSCI World or FTSE All-World indices

[@stonks4days1]

Been binge watching this channel between my work. You have a similar take on the market as I do as well as just following what the data and research tell you. ETFs are the way to generate reliable alpha while staying diversified. Personally, I've been really interested and invested in strategy-based ETFs as well as certain covered call ETFs. What do you think of ETFs like OMFL, SPGP, DSTL, MOAT, COWZ, etc.? These are alpha-generating ETFs that have beaten the S&P500 and stocks are filtered using cashflows, factors, and some value characteristics. These are US ETFs I don't know if there are Canadian versions of these.

[@josevictorroling5984]

these ETFs do not generate alpha. Generating alpha is getting a return higher than the risk you are taking, which is not possible to do consistently and for long periods of time in an efficient market unless you are jim simmons. These etfs beat the s&p500 but do not generate alpha, and btw they are not reliable etfs for the long run once one of them focus on dividends, that are irrelevant, and the other ones are either too young for us to analyse them or they focus on too much factors at the same time and also focus on nonsense "factors" like large caps and growth

[@emrahtestere5372]

Ben, please do research about the optimum saving rate for low-income people. Especially in Canada, should it be close to zero?

[@BenFelixCSI]

This is a great topic. I have thought about doing a video on it.

[@sunnyhing91]

For sure, the cash you refer is either saving account or fixed deposit. I would like to know whether short-term bond (as little as 3 month or 3 year max), T-bill or Money Market Fund are considered as cash investment as well?

[@BenFelixCSI]

3 month bills are the cash equivalent used in one of the papers I mentioned.

[@tubejim101]

What time frame is a long term investor?

[@PatrickStahlitrm]

The grand question is: Can the U.S. market continue gaining at the historical average forever (and/or from now until X investor is pulling out their retirement savings)?

[@DwarFStrider]

Your videos are amazing, Ben. Thanks! I am, however, confused why stocks continue to outperform cash even with high interest rates as hikes are expected to slow down the economic engine. If the economy slows down, how can it continue to grow at the rate you seem to suggest?

[@BenFelixCSI]

Economic growth is not where stock returns come from. Expected stock returns come from the discount rate applied to expected future cash flows. Investors will always demand a premium for owning riskier assets over safer ones. This premium should be (and indeed has been) persistent even when rates are high.

[@DwarFStrider]

@@BenFelixCSI Makes sense, yet stock prices always reflect a certain emotion amongst the stock market players, no? Emotions which are guided by market signals, and rising interest rates should also result in companies using less leverage for investments, thus reducing growth if they then decide not to use their cashflow for said investments. Or am I missing something?

[@BenFelixCSI]

Investment is negatively related to expected stock returns. All else equal, a company that invests more aggressively has a lower discount rate and therefore lower expected returns. I think you’re still mixing up economic growth and returns.

[@DwarFStrider]

@@BenFelixCSI Yup, I think you’re right 😇 Thanks for educating me, dear Ben! I’m an IT guy and pretty new to the game as I’ve just recently “woken up” to the fact that throwing away money on liabilities, while perfectly feasible now due to solid and well-paying freelance employment, will not guarantee my pension. I’ve just recently discovered that the stock market is nothing to be afraid of when you educate yourself, and your videos are helping enormously. Many thanks for your time and knowledge, I hope to learn more from you and contribute to the community.

[@chrisf1600]

​@rocksolid82 There's a one-time repricing of stocks to reflect the higher discount rate, but from that point on expected returns should be higher.

[@xvx4848]

I'm holding cash because I'll need it within the next 2-3 years, hence a short-term investment. I've got long-term investments in stocks but that's money I don't need to touch for 20-30 years. I think it's important to realize he's not saying cash is a terrible investment, he's saying it's a terrible LONG-TERM investment.

[@stephenframpton4616]

This is the best financial info I've seen on KZbin. Great reminder that when you're getting a big yield on cash, it means long-term returns in other assets are likely higher. Easily overlooked!! Thanks.

[@MoementumFinance]

This is an excellent and super timely video! You said it best: "Long term investors care less about volatily and more about how their expected return change with volatility. Stocks are less risky for a long term investor than their short term price fluctuations would otherwise suggest." 🙂 Amzing content as always 🙏👏

[@pistopit7142]

I was wondering what these words actualy mean: "how their expected return change with volatility"

[@BenFelixCSI]

If a stock price drops but it’s expected returns increase, a long-term investor would not be affected by the drop since the higher expected return offsets the price drop over time.

[@pistopit7142]

@@BenFelixCSI so easy to understand. Thanks Ben. Makes perfect sense now.

[@glorydays1565]

@@BenFelixCSI this applies only to _after_ the investor has made his or her investment decision. The moment he or she decides to invest, an invariable expected return is set (typically based on fundamentals). If you buy _exclusively_ into overvalued markets, you have already made your first mistake. Long-term investors should primarily care about fundamentals when taking investment decisions as they determine expected returns in the first place (“in the short run, the market is a voting machine but in the long run, it is a weighing machine.”). This is the reason why market timing becomes less significant in diversified portfolios: In such a portfolio, you can invest at virtually any time, since it is highly unlikely that the whole market / all asset classes are overvalued at the same time and the expected return of the overall portfolio is much more stable over time (otherwise your portfolio would not have been properly diversified in the first place).

[@jameszeng2666]

Totally agree, my friends laughed at me for holding stocks this January. Tbh I am surprised that stock market rallied so much myself, but I know my time horizon is much longer than 1 year so short term volatility doesn't matter so much

[@mathgasm8484]

I rarely sell anymore I just add to it. it would have to be stupid overvalued for me to reallocate.

[@esb9814]

what specifically do you add to? index funds? target date?@@mathgasm8484

[@dominikthibault5902]

Hey ben, I rewatched the video and the figure presented at 5:16 caught my attention. You use it to prove that stocks/bonds premium is percistent even in high interest rate environment, but it also seem to prove that the spread between stock and bond returns diminish with increased interest rate. In this context, does it make sense to increase bonds exposure in these environment ( relative to what your investor risk profile would suggest otherwise)? Thanks in advance for your answer

[@BenFelixCSI]

I don’t do that, but there is an argument to do it. Not with regular bonds though. A strategy with variable exposure to stocks and intermediate TIPS based on the time varying equity risk premium has theory and evidence supporting it. It was detailed by one of our podcast guests. rationalreminder.ca/podcast/270?format=amp

[@dominikthibault5902]

Thanks a lot for your answer@@BenFelixCSI ! That was a very interesting conversation that you had on episode 270. I will add ''the missing billionaires'' to my read list! I don't know if you are compensated in any meaningful ways for providing such valuable content, but I hope that you at least feel the satisfaction of improving others' life in a very significant way. Over the years you provided me (and lot of people around me) with the knowledge that empowered me to become a disciplined and hopefully successful DIY investor.

[@Willyama]

This is exactly why warren buffet never has any cash positions 👍 excellent video!

[@BenFelixCSI]

If you believe hard enough, you too can be just like Warren Buffett. Good luck, friend.

[@dotpenji]

Ben, your explanation about the drawbacks of holding cash for long-term investments is incredibly insightful and well-reasoned. Your ability to break down complex financial concepts into understandable terms is truly commendable. Now, if you had to give cash a mascot to represent its true nature as a long-term investment, what kind of character or symbol do you think would best capture its unpredictability and lower expected returns compared to stocks and bonds? 😄💰

[@BenFelixCSI]

What a question 😂.

[@monicasoriano8581]

I couldn't agree more with your insightful analysis of the drawbacks of holding cash for long-term investments. Your ability to simplify complex financial concepts is truly commendable and makes it easier for everyone to grasp these important ideas. As for the idea of giving cash a mascot, it's a fun and thought-provoking concept. Great video btw, keep up the good work Ben!

[@monalizapantoja8490]

Agree! Your video serves as an educational resource for anyone looking to make informed decisions about their long-term investments, and I'm sure it will be helpful to many viewers. Keep up the great work in spreading financial knowledge!

[@lusyow0517]

A mascot to represent cash as a long-term investment could be a "Sleepy Sloth." The sloth embodies the idea of a slow and steady approach, emphasizing the lower expected returns and the relatively stable but slow growth associated with keeping cash over the long term. Just like a sloth, cash investments may not be as dynamic or high-yield as stocks and bonds, but they offer a sense of safety and reliability over time.

[@iracaullenegatan6668]

Hi Ben, your insights into the world of investing and the role of cash are truly enlightening. It's clear that you have a deep understanding of financial markets and the nuances of long-term investing. For someone looking to diversify their investments beyond cash, stocks, and bonds, what other options or assets would you recommend exploring? Your expertise would be incredibly valuable for those of us looking to make informed investment decisions. 😊

[@dipstinger]

Could you do a video on managed futures? What they are, and if they offer a diversification benefit? They seemed to have historically good returns.

[@NateCohenPix]

Hey Ben, I’ve been a huge fan of your channel for a long time. I have a question about your BTD chart. I assume the figures do not account for the returns an investor might expect from cash while waiting for the dip. If we take the example of world 20% dip, the spread is 2.2%. But if the investor is earning 5% on cash in the interim, wouldn’t that put the investor ahead by 2.8%?

[@agentsnorlson7913]

You also get returns from shares in the form of dividends

[@BenFelixCSI]

They do account for the returns on cash while waiting to buy the dip. That’s the analysis that we did. Sit in bills until a drop of 10% or 20% then invest in stocks. It loses most of the time.

[@in_my_mind7781]

What duration is recommended ?

[@PlattiJ]

Where do I park my cash while I wait for the drop?

[@igiveupfine]

@5:10 in the video, you talk about how since 1900, over a 5 year period, expected returns on stocks is still better than expected returns on cash. does this also hold true for a 2.5 year window? or is that an unhelpful comparison because it's such a short window?

[@BenFelixCSI]

I don’t have that data but it should hold at any horizon, it will just be noisier at short horizons.

[@jayneorum3676]

When you say "cash" do you mean actual cash as in what's in your wallet and checking account?

[@ivanreii]

Excellent advice, agent 47

[@brianaylward7617]

What real return bonds are available for Canadians?

[@nicoepsilon0]

Thank you Ben. The only place I hold cash (in the Horizons High interest savings ETF) is in my FHSA where I expect to buy a house around 2030. Does a moderate or conservative asset allocation portfolio etf can be considered as well for this time horizon?

[@BenFelixCSI]

For a 7 year horizon there is likely more volatility than you want in even a conservative AA ETF.

[@4.0.7.7]

Also noteworthy: Interest earned in unregistered savings or GIC funds are taxed in full, while tax earned on investments from the market is taxed at half.

[@ivanbravomunoz1305]

So then it really depends what you consider short-term and long-term time horizons.

[@mfreddy22]

Would love to have you add in paying off a mortgage to this equation. For example, I have a 5.75% ARM 7-year mortgage, but am building up cash in a 5% saving account that stays liquid for my business. I also have about 60% of my net worth in VT stocks, but thinking I may need to add more.

[@scottthompson3493]

Do both

[@user-eb3pi4tv9k]

Cash has outperformed most other investments and allows you to have liquidity to buy good assets when things are cheap. It’s right to worry about market crashes, I’m from the U.K. where the market has gone nowhere for 20 years and japan’ market took 30 years to recover.

[@cborecky]

I wonder what's the expected return on stocks in timeframes when the yield curves are inverted?

[@maxk3062]

Under what time frame? Stocks may underperform in the medium-term (1-2 years), especially if an economic downturn follows the yield curve inversion. Over the long run (5-10 years), the stock market has historically recovered, often generating positive returns.

[@dacianbonta2840]

A) depends on what the goal of investment is @1:52 that's quite presumptuous

[@DavidHMacFarlane]

Hey Ben, What do you think of the view that even some shorter term investing /saving should be in equities because all those short horizons in your life add together to be functionally equivalent to a longer period... you'll lose on some, but win on others. It has the added benefit of increasing your equity exposure throughout your life, not just in the 60 to 70 window, reducing some timing risk. I know it's somewhat hetero-orthadox, but it makes sense to me. You'll know better than me where some of these ideas come from, but I think it might be Lifecycle Investing. Thanks

[@greg5892]

I don’t understand what you’re getting at because adding together short term horizons is a longer horizon. The point is you need to have some money available to draw from if you wind up needing it during a period where you’d lose a ton of your portfolio’s potential growth by selling in a down market. You’re not going to care if in 20 years you have a short term need when the market is up because you’ve lost that time value on the money you took out of the market earlier.

[@DavidHMacFarlane]

@@greg5892 No, if you're going to have a smallish amount of money, maybe you can invest it in equities. This is going to happen 12 times during your life. Perhaps you'll need to sell twice, but the winds on the other ten instances may more than make up for it. I think the focus on a cash emergency fund is overblown. A line of credit, lower volatility assets (say laddered bond fund) and even equities that you'll liquidate if necessary can all be part of an emergency fund.

[@red149]

How about Tbills for some dry powder ?

[@tyrusgibson6891]

Hey Ben, thanks for another outstanding video. I'm wondering if you could comment on what defines short-term and long-term. I think we all intuitively know that next week is short-term and three decades is long-term, but, for example, if one wants to buy a house in a year, is that short term? What about 18 months? What about five years? Thank you!

[@kevinschultz6091]

Yeah, I personally rank 0-2 years as "short term", with 3-5 years as "mid-term" - with the mid-term investments being things like "saving for a mortgage downpayment" or "planning on getting a new car in a few years". In that scenario, my short term investments are all cash+iBonds; ie, my emergency fund. I've got 2 months of expenses in cash (in my checking account), and 6 months of expenses in iBonds. For the mid-term, I use T-notes (between 2 and 10 years) and TIPS, and dedicate them (in my head) for specific purchases at specific times. If I don't use them, I just roll them over and assign them to a different, longer-term purchase - or else dedicate them to having a mid-term retirement fund to weather market fluctuations. That being said - the Money Guys recommend anything 5 years or less to be in cash or near-cash equivalent (ie, CD's, cash, or short-term bonds). So for them, the breakoff point between short and long-term seems to be 5 years.

[@Fenrir7]

Great question and I'm curious to see Ben's answer. I suspect 18 months would still be considered short-term. 5-10 years is probably where the cutoff from short to long-term is, IMO.

[@simplefinance]

I agree with Fenrir7, while I don't know what Ben would say, I think many people would say this is AT LEAST 5 years+. Emphasis on AT LEAST. This is because stocks generally gravitate towards their intrinsic value, but it takes about 5 years for the correlation to begin to form (between stock price and fair value). The correlation then gets stronger as more time passes. A year or even 18 months would be pretty unpredictable for stocks.

[@paul_e123]

What about real estate vs cash for the next 3-5 years?

[@KJ-fv1oz]

Hi Ben. What to do retirees?

[@TheJohdu]

i was going to ask if you could link your "buy the dip" paper, but *wosh* there it is. you should be awarded a public service medal. thanks so much!

[@jdingle8885]

Sometimes its better to worry about not losing money. After long period of gains.