Student Comment: How Much Emergency Reserve Is Needed? Is the Market Distorted?
The reply distinguishes emergency cash for workers and retirees, and argues that investment is about future company growth, not current economic headlines.
[Student comment] How much emergency reserve is needed? Is the market distorted? Easy Investment Chat CLEC Investment Channel. Post date: June 08, 2020
Question:
Do you think we should keep at least 30% cash? I feel the current market is distorted, a bit like A-shares, with policy and news propping up the stock market. I am a salaried worker. Would being more conservative be better?
Reply:
The complete cash position I discuss differs for two kinds of people.
-
If you are still working, keeping six months of living emergency reserves is enough.
-
If you are retired and have no income, you should keep around two years of living emergency reserves.
You do not necessarily need to reserve 30% cash.
Other than emergency reserves, you should be fully invested.
No one knows whether the market is distorted. These are things economists, financial journalists, and market analysts say. There is no statistical data or basis. Without tracking all capital flows, it is impossible to prove that these analyses are correct.
The economy is not the stock market. The economy is the present; the stock market is the future. As long as companies will grow over the next five or ten years, the stock market will rise. Investing is, after all, investing in the future, and it does not have much to do with the current economy.
Good investment should build factories and buy machines when the economy is bad, because costs are lower and cheaper.
When the economy is booming, costs are high, everyone rushes to produce, and competition is fierce. That is when investors should be careful.
So investing is different from what economists and market analysts think. If you are about to open a store or factory and ask economists, they will definitely encourage you to invest when the economy is booming and competition is fierce. Now the economy is poor, which is exactly a good time to invest, but economists tell you not to invest. So economics and investing are two different things.
More Posts
Worried About Market Ups and Downs? James: If You Are Worried, Stop Investing Immediately!
I am grateful to have found you last September. For nine months, I have listened to your lessons during my commute to and from work.
從1,200萬到4,000萬：長期投資不只改變資產，更改變整個家庭
CLEC James 漫談第23集：從1,200萬到4,000萬：長期投資不只改變資產，更改變整個家庭
![Chapter 18 [Why we only recommend investing in US index funds]](/_next/image?url=%2Fimages%2Fblog%2Fjames-history-and-today%2Fen%2Fjames-history-and-today-0024-cover.png&w=3840&q=75 "Chapter 18 [Why we only recommend investing in US index funds]")
Chapter 18 [Why we only recommend investing in US index funds]
I remember when I was designing products at the Multimedia Laboratory in the United States, I knew very well that American innovation was number one in the world. When we were thinking about a product in the United States, we were definitely not thinking about how to copy other people's products, but starting from scratch based on human needs, starting from thinking about consumer needs, then entering into the design structure, and finally completing the product. Therefore, in the United States, most of the original technology was started from scratch, and the same innovative technology was transferred back to Taiwan. Taiwan's new technology products are a little bit different.
Newsletter
Join the community
Subscribe to our newsletter for the latest news and updates