# Too much cash savings - how to protect against possible hyperinflation?



## MelF (27 Feb 2020)

OK, long story short. The coronavirus is making me nervous. All this talk of markets crashing, US debts being exposed etc and economies being brought to their knees Venuzuela style?  
Basic situ is I have about 600k cash savings spread across Euros/sterling/USdollars and located in each country.  
260k interest-only mortgage outstanding on PPR @ interest rate of .05%.

Self-employed freelancer meaning my income is irregular is why I kept such a reserve as 'patting money' but aware I'm seriously overexposed in case of hyperinflation now. If I pay off the mortgage with some of that cash, doesn't hyperinflation mean the debt is devalued too? So I'm not really solving anything.

Panicking here ... which I know leads to irrational decision so greatly appreciate sound advice from some calm heads!


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## Brendan Burgess (27 Feb 2020)

It's unlikely that the Corona virus will lead to hyperinflation. 

You have €600k cash and €260k mortgage. 

If you are very worried, then clear the mortgage as that is the best way to reduce risk. 

With €340k cash left over, there is no risk free way of investing. 

However, real assets such as property and shares tend to exceed inflation over the long-term. 

As you might need access to your cash, property is not liquid. 

So you should buy a portfolio of shares.  They could well fall further but it's not possible to time the market. 

Brendan


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## Saavy99 (27 Feb 2020)

With 600K cash savings. It's a no brainer to pay off your mortgage. Shares may collapse, governments can lay hands on your cash etc etc but at least your home will be  paid for.


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## MelF (27 Feb 2020)

But am I not robbing Peter to pay Paul if we get v high inflation and the mortgage amount is devalued too?

Was also thinking about land - have been dithering over a purchase and thought now might a good time to pull the trigger ...


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## Sarenco (27 Feb 2020)

Pay off your mortgage and make sure that all cash deposits are within the applicable Government guarantee limit.

If inflation takes off, interest rates will follow.


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## landlord (27 Feb 2020)

MelF said:


> OK, long story short. The coronavirus is making me nervous. All this talk of markets crashing, US debts being exposed etc and economies being brought to their knees Venuzuela style?
> Basic situ is I have about 600k cash savings spread across Euros/sterling/USdollars and located in each country.
> 260k interest-only mortgage outstanding on PPR @ interest rate of .05%.
> 
> ...



It’s this fear that convinced me to diversify my portfolio into precious metals, both physical and stocks.


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## Fidgety (27 Feb 2020)

Thanks to your own hard work, you’re very comfortable with cash savings that can weather work uncertainty, market instability and other short term irregularities.

Pay off your mortgage and enjoy well-earned peace of mind. Retain sufficient cash to provide for 6 or 9 months income. Choose 8 or 10 great companies and invest the remaining cash in shares for long-term modest growth. 


Enjoy your life and try not to get rattled by stuff we can neither control nor foresee. CV19 is worrisome and we don’t know if it’s hype or horror. I’m confident the smart people in medicine will find a solution.

And in your calculations, price in the utility of not worrying.


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## MelF (28 Feb 2020)

Appreciate your reply and advice thank you.


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## NoRegretsCoyote (28 Feb 2020)

MelF said:


> The coronavirus is* making me nervous*..........*Panicking *here



Sleepless nights over events you have no control over is not good for your health.

A good use of your hard-earned savings might be to spend a small fraction on treatment that leaves you less prone to anxiety.


Otherwise I am somewhat well informed and I don't see hyperinflation as a material risk at the moment.


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## Fidgety (28 Feb 2020)

You're not alone to be worrying or anxious during this difficult time. The scale of the market sell off this week speaks to considerable irrational fear. And while it's perfectly understandable, it's somewhat irrational. We're in for a rocky ride short-term that none of us can time or predict and we don't need to do anything except mind ourselves. As others have said, hyperinflation is not on the cards. Ironically, when the dust settles ...and it will.....we will witness irrational exuberance to the upside.


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## Fidgety (7 Mar 2020)

For what it's worth MelF, I also have too much cash saved circa 470k and I'm about to invest with this volatility because I see great value.

Some context.....

I worked and saved hard to ensure I became mortgage free, and I max my pension contributions. This is crucial because it sets you free from debt. That, in itself, is a wonderful achievement because it liberates you from lots of stuff including anxiety. You enjoy the benefit of living in your own home without having to pay for the privilege of using someone else's money. And you have a very tax efficient asset.

I have invested in equities from a young age and now my portfolio is considerable. It started as a hobby because I liked watching companies develop and I'm naturally curious. Oddly enough, as I looked back on it, a quid for the mortgage was matched by as much as I could save. And companies I liked that performed well attracted more of my savings. And over-time, with the benefit of compound interest, consumerism, economic growth and luck, it increased in value. I rarely sell and when I do, it's only as a result of some fundamental change in the business e.g.competition, margin pressure, pricing power etc. or a major project when I refurbished my home in 2005 which proved to be my best ever investment. And as with any collection of anything, I've a couple of superstars, some consistent solid performers, and a few dogs. I review the performance once a year, normally in January, because I don't have the time or interest to watch them closely. To my mind, that just causes unnecessary stress and I'm comfortable with my selections. Sometimes, but not often, I cash out of a dog to invest the proceeds in something better. Moreover, I know that I cannot time the market and that there will be volatility in both directions. 

I witnessed wealth destruction on an unimaginable scale when the Celtic Tiger crashed. Many people were swept up in a frenzy collecting 'stuff' with borrowed money that beggared belief. The many who lived within their means were made to feel like idiots. And banks merrily fuelled this procession dishing out money all over the place on all sorts of hair brained schemes that a monkey with an abacus would know it would be better to avoid. As a consequence of watching and witnessing the distress this debacle cast on many innocent people who lost their jobs when businesses folded, the crisis took hold, property crash, mortgage defaults etc. I place an even greater premium on cash now than I ever did. In truth, I recognise that my mental well-being depends on my ability to value cash differently, one part security and one part utility by way of opportunity. Better still, I know that surplus cash earning next to zero is not smart. But it gives me a benefit that has no price and represents a modest % of my assets. That is, until I generate too much and find no opportunity to deploy it. And that's where I am now.......ready to pull the trigger because other things I have looked at don't float my boat, with the exception of a small farm which became a romantic notion when Mrs. Fidgety wondered how I was going to mind myself on my own!

Anyhow, forgive the history, it's purely to explain that it's okay to be unsure, to have doubts and to worry every now and then. We all do. Investing for the long-term will protect your hard earned savings and generate wealth. Of that I am certain. I've done it from modest beginnings and now have enough for a comfortable lifestyle in retirement. It's been butchered this week, maybe next week, maybe for a couple of months, a year, who knows until we get the virus killed but it will be fine when I need it in 7 to 10 years. And I will buy some more of the equities I own, and some I have fancied that have retreated to my price point and I will try to stay healthy and enjoy my life.


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## jimmy1981 (7 Mar 2020)

@Fidgety well done and found you post very informative. You say you started as a hobby investing... Did you do any courses along the way or what resources did you rely on as the portfolio grew? For an education point of view would be interested to know


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## Fidgety (7 Mar 2020)

Thank you jimmy1981. I woke this morning and felt like a bit of an eejit for writing a rambling post but I sincerely wanted to help MelF and others with the corrosive issue of anxiety when it comes to making investment decisions. Now to try to answer your question.

My grandfather had a very successful business which went bankrupt when a number of customers took advantage of his decency and never paid him. This had a catastrophic effect on him personally, he was never the same wonderful bright eyed gem, and scarred my mother. When we were kids, she insisted that we open savings accounts and put our pocket money in every month. Communions, confirmation, odd jobs etc...were all directed into theses accounts. We were free to spend this one as we wished but it's amazing how you trim your spending when you've a nest egg, even at that early age. I played a lot of sport and used to buy myself nice gear. As it happens, a German company with 3 stripes made great runners and I bought their shares and still own them today. I started a car wash business with my pals and admired German motor cars, so I bought a few of them, and I still own them today. This interest heightened and I started to read about companies I liked, the strategy they deployed, the quality of management etc etc and as I earned more from working hard, I bought pieces of what I thought were great companies. I noticed that PC's were taking over the world so I bought a piece of the fuel that powers them, software. And so on and so forth rarely changing from this philosophy. 

So as my portfolio grew, I would read the annual reports and the quarterly updates with no specific financial know-how but with a keen eye on the fundamentals. And if at any stage these companies pulled back for no apparent reason, I would buy more. Sometimes, without market volatility, companies disappoint and investors retreat. It's almost always fixable and understandable but markets are too short term in attention and the correction is almost always overdone. Today, we have just such an over reaction based on what we don't know and fear. Those who cash out have no other comparable investment opportunity to replace the asset class they've abandoned and invariably will panic trying to get back in. I make no judgement but I believe such herd behaviour ultimately increases anxiety.

It's my view that we don't need any specific skills to participate in a general sense. If the goal is to protect and preserve savings with the added desire to increase wealth for old age, then it's a matter of picking great companies you like, reading about them to inform your self better, and buying a piece of them when the price meets your sense of reasonable. And pullbacks are opportunities to buy in the January sales. I'm not an impulse buyer so if I fancy a suit, I wait for the sales and maybe if it's good value, I'll buy two.

Finally, and importantly, I don't buy speculative or penny stocks. I choose large caps with enormous financial firepower, with dominant positions in the market and ambitious growth plans. With this criteria, there are lots of choices and you don't need to be very smart. And if I get a couple wrong, so what, I learn from failure and welcome it because it makes me better. Hope that helps.


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## guru_wannabe (7 Mar 2020)

People having large amounts of money (above gov guaranteed limit), worried about inflation and market crashing and no one suggesting buying physical gold? 
Markets are not for everyone and I doubt that someone who managed to save half a mil and currently panicking because of the virus would keep calm watching the value of his saving going +/- 10-30-50%
And by the way, there's no need to panic...it's a flu virus, sooner it spreads around the world sooner will population become immune to it.


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## Fidgety (7 Mar 2020)

Buying physical gold is difficult, best done through specific ETFs or mining companies. And yes, a safe haven in times of difficulty.

Market volatility of the extreme nature we’ve seen recently and which is most likely to continue, is not for the faint hearted. Then again, a longer term time horizon is essential.

Agree that we need to avoid panic but not so with your assertion that the sooner it spreads the better. This virus is sinister and complex and will require all of our know how to kill.

Meanwhile, leaving aside the issue of personal wealth, it’s the common wealth of all that we need to get back on track.


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## guru_wannabe (7 Mar 2020)

Fidgety said:


> Buying physical gold is difficult


Why? I used Merrion gold and Irish gold bullion, never had a problem with any of them. Buying ETF or mining companies means you're back on market with all its volatility. I would recommend sticking to investment gold (24ct, bars, 1oz and havier). And to be clear, not with all your cash!


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## Fidgety (7 Mar 2020)

Physical gold requires storage and holding costs, associated transaction costs. Individual mining companies means putting all your gold in one basket so to speak. ETF's are more flexible, convenient, lower entry price, broad spread of companies, and can be focused on the price of the metal or the performance of the companies who mine it. Nothing wrong with either approach, both have merit.


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## joe sod (7 Mar 2020)

Fidgety said:


> My grandfather had a very successful business which went bankrupt when a number of customers took advantage of his decency and never paid him


I think this is a very Irish thing, Ive heard this happen alot especially during the financial crash, people knowingly tricked people even though they knew they would never pay them, the poor subcontractors then. Its something that doesn't happen so much in Britain or the continent. It happens because it is not shown up in Ireland, its accepted


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## Fidgety (7 Mar 2020)

To my limited knowledge, the chief culprits of the most egregious instances of sub contractors not being paid were from those who could most afford to pay them. And that's before the wheels came off and it all came tumbling down. I don't think it's accepted anymore, at least I hope so in the sense that many sub contractors, small businesses require payment in advance or deposits and strict payment schedules.


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## joe sod (7 Mar 2020)

@Fidgety so you have been investing for a long time, longer than me anyways, I only started in 2001, did you start in 1980s?, if so how compared to then does today's investment environment differ?, I think it is much harder, the whole demise of whole sections of industry and retail that had existed for many decades and evolved consistently . For example Warren Buffett was a big investor in Gillette for decades , that was one of his show case boring investments , because guys are always going to have to shave right, right, until a decade ago, the millenials ditched that investment for him.
The software company you invested in, did you stick with it through the dot com bust, if so you probably had to wait a decade for it to recover but probably handsomely rewarded now?


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## Fidgety (8 Mar 2020)

Joe sod, some interesting questions which I will try to answer.

I started when it was a very different world. The environment was simpler and more traditional. Investing was primarily the preserve of the wealthy and financial information was hard to acquire. Newspapers and annual reports, endless form filling and tons of paperwork right down to the share certificates themselves. So my first observation is that it seemed simpler to choose companies but more complex to get it done. Organic growth was more predictable and steady as you suggest in traditional industries that had stood the test of time. The age of disruption had not really gathered pace and globalisation, as we know it today, was only ramping up. 

Buffett sold Gillette to P&G and effectively took the payment by way of shares in P&G. Beneath his folksy exterior is a really sharp mind. And he's man enough to admit when he gets it wrong which I admire e.g. not investing in tech because he didn't understand it. Now that he has some younger people working with him, he does or they do on his behalf.

The game changer, the leveller, and the equaliser was the advent of the internet. Information and education is now available to anybody. We can learn about all sorts of things. And that's an investors friend. The downside is that we're battered with information 24/7 and that's a challenge to manage. That we are better informed, able to share and better off because of this and other technology is great. The choice for investments is now bewildering. And it's complex in a different way, by its sophistication, speed and transparency. But I think that the same basic tenets hold true.

And yes, I stuck with the software company right through to today. Software fuelled computers and one company did it better than anyone else. I viewed it as petrol in a car. Much better gross margins, hard to copy and PC's could not operate without it. Very sophisticated analysis. I stayed the course through thick and thin because I regarded the company as an unregulated super monopoly. And I got lucky. I missed others because I was too conservative or to quote Buffett, I didn't understand what they did. But many of the more traditional businesses did very well over the years and still do. They paid dividends and bought back shares. And almost all of us use their products or services in one way or another. Market dominance, fortress balance sheets, great management, enviable margins and sensible growth.


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## joe sod (8 Mar 2020)

Fidgety said:


> Joe sod, some interesting questions which I will try to answer.
> 
> I started when it was a very different world. The environment was simpler and more traditional. Investing was primarily the preserve of the wealthy and financial information was hard to acquire. Newspapers and annual reports, endless form filling and tons of paperwork right down to the share certificates themselves. So my first observation is that it seemed simpler to choose companies but more complex to get it done. Organic growth was more predictable and steady as you suggest in traditional industries that had stood the test of time. The age of disruption had not really gathered pace and globalisation, as we know it today, was only ramping up.
> 
> ...


Ok


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## joe sod (8 Mar 2020)

Buffett invested in Apple, but I think you invested in Microsoft ,can I ask you when did you make this investment, I also invested in it but only in 2011, but sold in 2018, more fool I , that's the hardest bit, staying with a winner


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## Fidgety (8 Mar 2020)

Late 80’s so I had considerable upside before the lost years where it didn’t do much but under Balmer. I have some Apple but late 00’s.

Buffett in now the largest shareholder in Apple and had doubled his investment before this volatility.

The recent bull market has been excessive and was due for a pullback. There’s a lot of cash on the sidelines waiting for entry points even before the correction.

You cannot be blamed for exiting given average performance during the timeframe you mentioned. I did similar with Amazon because they had no profits and that didn’t make sense. Now I understand it but that’s one for learning. I am still not interested in the new age growth at all costs, never mind profits, even though I know many do very well. I question how long this can continue.

Never worry about the one that got away because the next one is around the corner.


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## joe sod (8 Mar 2020)

@Fidgety to be an in investor in an American software company in the late 80s before Windows and before the internet took some foresight, well done on that. What's your opinions on technology today, do you think the rate of change will continue, I don't think it will, I think the low hanging fruit has already been picked, I think improvements in technology will be very hard won, elon musk et al have a much harder task than Bill gates in the late 80s. It won't be as profitable either even if the technology turns out to be good


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## Gordon Gekko (8 Mar 2020)

If I was the OP, I’d clear my mortage, invest €250-300k in global equities (right now), and I’d keep €40-90k in cash. The variability is based on my lack of knowledge of the OP’s net income per year. Whatever that is, I’d keep one year’s worth of it in cash.


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## Fidgety (8 Mar 2020)

I would agree Gordon Gekko. With uncertain future income, it seems sensible to have more cash inland than normal. And we tend not to price in the safety aspect of knowing there is cash on hand to weather any unforeseen circumstances. And while you can convert equities to cash quickly, in the current volatility, markets may well swing wildly until we have a handle on this virus.


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## Fidgety (8 Mar 2020)

Joe sod, if someone had invested in technology large caps in the past 5 years, the gains would be considerable, Microsoft trebled in 3, Apple doubled in 1, not to mention Tesla but nobody could have expected those unsustainable returns. With Tesla, Musk is shredding conventional wisdom and attracting a frenzy of investor interest. Too frothy for me at these levels but I believe he's the battery innovator and has leading edge technology that few others can catch. The headwinds are numerous and his competitors well armed but I admire his courage. The vision that you can tile your roof with solar cells, harvest the energy to use to power your home and store the excess in batteries for off peak usage strikes me as bold. That you can generate the fuel for your car in this way, with range increasing, and updates over wifi seems like a potential unassailable moat. Better still, it's green technology at a time when we're under assault with global warming and it's devastating impact. But the posse are coming, he has to deliver the numbers and he's burning capital at an alarming rate. 

The large unregulated monopolies in technology will continue to innovate and thrive. The financial and market firepower at their disposal is immense. I don't see that changing any time soon because the barriers to entry are simply too high. A couple have been overlooked and not delivered on their true potential so perhaps there's opportunity with this volatility to grab a few and see what happens. On the wider front, I agree that much of the low hanging fruit appears to have been priced in on the established names but that's often been said before and still they forged ahead. With this volatility, large corporations will press home their advantage putting smaller rivals under intense pressure. They'll likely use their cash to increase share buy backs and many will move the supply chain infrastructure out of China and closer to the consumer. In more traditional industries, similar consolidation will occur for many of the same reasons. The weak, poorly capitalised smaller competitive rivals are vulnerable to the impact of this virus and it's paralysing effect on normal consumer behaviour. And in times of fear, we tend to hoard and not spend as normal so that's going to have a considerable impact on our economies. Bargains will present themselves across a wide range of industries and our innovative nature will accelerate.


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## RedOnion (8 Mar 2020)

Gordon Gekko said:


> If I was the OP, I’d clear my mortage, invest €250-300k in global equities (right now), and I’d keep €40-90k in cash. The variability is based on my lack of knowledge of the OP’s net income per year. Whatever that is, I’d keep one year’s worth of it in cash.


Fantastic to see a post on topic, actually offering advice. The advice here is valid at any time to someone in the OPs circumstances.

The OP is stressed about a level of hyperinflation that would lead to a demise of one of the world's most widely used currencies. They've mentioned already irrational thinking - and the thread descends into stories about stock picking! Hardly appropriate, especially in those circumstances.


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## Silvius (8 Mar 2020)

Interesting thread - I'm in a similar position to the OP - have too much savings in cash and not sure what to do to protect and grow it. Mortage cleared and income secure. The answer seems to be invest a portion of it in a portofolio of diversified equities and possibly bonds but the question is how do it? How do you know who to trust in the investment houses and honestly how much should you be paying annually for their services?


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## Protocol (8 Mar 2020)

A global downturn will lead to less inflation, not hyperinflation.


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## NoRegretsCoyote (9 Mar 2020)

Protocol said:


> A global downturn will lead to less inflation, not hyperinflation.



Nothing is certain.

Anyway, cash deposits basically pay zero on net and inflation could be 10% cumulative over the next five years in a pretty central scenario.


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## Ravima (9 Mar 2020)

_Physical gold requires storage and holding costs, associated transaction costs. _

you can hold a couple of dozen coins in a tin. There's no storage or holding costs. To sell, you phone ahead, fix your price then send by reg post. Simple really


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## EmmDee (9 Mar 2020)

Ravima said:


> _Physical gold requires storage and holding costs, associated transaction costs. _
> 
> you can hold a couple of dozen coins in a tin. There's no storage or holding costs. To sell, you phone ahead, fix your price then send by reg post. Simple really



What is the spread on physical gold coins... And how exact is the linkage with gold prices (I know it's a driver but unless you're melting down the coins it isn't a 1:1). I'm guessing gold could rise 20% and still not have broken even


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## RedOnion (10 Mar 2020)

EmmDee said:


> What is the spread on physical gold coins... And how exact is the linkage with gold prices (I know it's a driver but unless you're melting down the coins it isn't a 1:1). I'm guessing gold could rise 20% and still not have broken even


Depends on the size. On a 1oz coin you're looking at about 6.5% spread at best. Anything smaller has a bigger spread.
The linkage to spot price is very good; Gold coins are made for investment, so you're buying the gold, not the coin quality. However, at times there is demand for specific coins that are in short supply, pushing the price up. There's no benefit in holding these over any other coin, or bar, when it comes to selling them.


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## azerogo (10 Mar 2020)

Gold is not an effective hedge as long as counterparty risk does not rise, US Treasuries are a better hedge.


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## MelF (11 Mar 2020)

Thanks all for your varied responses. Already feels like a totally different world to two weeks ago when I first posted this. Since then I've bought a little bit of gold as security, and the stock market has already reacted so I'm staying away from there. 
My concern now is the slashing of interest rates worldwide and deposit 'bail-ins' that seem likely to follow. 

Metatron, could you elaborate as to why?



Metatron said:


> No chance of hyperinflation so thread is moot


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## Itchy (11 Mar 2020)

Metatron said:


> If you had taken this advice on Monday, you would have probably lost about 10% of the amount invested in global equities unless you were very lucky. 25,000 to 30,000 is a lot of dough.



Ah yes, the famous three day equity investment strategy    . If you're advocating staying in cash, at least make an argument


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## Gordon Gekko (11 Mar 2020)

Metatron said:


> MeIF,
> 
> If you had taken this advice on Monday, you would have probably lost about 10% of the amount invested in global equities unless you were very lucky. 25,000 to 30,000 is a lot of dough.



No you wouldn’t. A loss is only a loss when it is realised. We’d have ascertained the OP’s time-horizon, made it clear that the portfolio could fall in value initially, and reassured the OP that the plan remains sound. Long term wealth should not be managed based on short-term noise.

Monday morning quarterbacking isn’t particularly clever. Part of the reason that equities deliver the best returns is the fact that it’s not an easy ride; if equity investing was easy, everyone would do it.


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## RedOnion (14 Mar 2020)

Investadvice said:


> worried about bank bail ins now


Do you own a lot of bank shares, or bank bonds?
If not, you might explain what it is you're worried about.


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## RedOnion (14 Mar 2020)

Investadvice said:


> No bonds or shares, just cash


So how would a (very unlikely) bail-in impact you?


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## Brendan Burgess (15 Mar 2020)

I have tried to pull all the separate issues together in one thread





__





						"My shares have fallen 30% what should I do?" "Is this a good time to invest in the stock market?"
					

To save people reading through lots of posts in different threads, I am going to summarise my views and the contrary view in this thread.  There are two camps  Camp 1 believes that you cannot time the market.  In other words, it's not possible to identify whether the market is overvalued or...



					askaboutmoney.com


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