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birb_cromble  3d ago (text post)   660 thread views

Weekly Finance Thread - 2026-08-01

A weekly thread to discuss financial matters - from personal all the way up to global.

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One common friction point that keeps coming up in these threads is something that I can't clearly name, but seems to be the friction between one person's perceived optimal behavior and another person's risk tolerance. One person will say that they are doing something, and another person will comment that the first poster is Doing It Wrong because they believe there is a more optimal path that they could take. It's a very binary thing that seems common in the Internet in general. I think it comes from a benevolent place, but it seems like it can push people off from the topic entirely as much as it can educate them.

I've been thinking about that lately because of events in my personal life. My partner is a fairly responsible saver, but she's not really investing. She's in the upper half of her age group for net worth and doesn't have any debt, but I worry that inflation is going to eat those savings over the long term. I've gently tried to get her to consider moving some of that money into funds over the years, but for her, it's entirely too much risk. I've not really pushed on it because what she's doing is better than doing nothing, and nothing is her alternative right now.

For somebody who has that extreme level of risk aversion, what options are there that beat a HYSA? Browbeating her into equities isn't going to fly.

On a similar topic, are there "non optimal" things that you do financially, but you do them anyway?

  1. I pay ahead on my mortgage, even though the interest rate is "only" 3.75%.
  2. I hold some dividend stocks and funds, and even commit the cardinal sin of holding them in a taxable brokerage account.
  3. I don't use credit cards outside of the bare minimum necessary to keep them active.

In all three cases, it's entirely a psychological thing for me, and I recognize this. In the first two in particular, it's still better than not doing anything at all

For somebody who has that extreme level of risk aversion, what options are there that beat a HYSA? Browbeating her into equities isn't going to fly.

First, say a prayer of thanks that she's dispositionally a saver.

I'm not sure any large single changes exist which aren't going to induce a ton of anxiety, so whatever happens is going to have to be both small and prove itself to her. If you're trying to get her there specifically to combat inflation risk (likely a good idea, given Congress's bipartisan disposition toward federal spending), maybe the approach should hinge on whether or not inflation is salient to her.

If she doesn't really pay attention to it or grok the tax drag on HYSA interest, it might be possible to get her to throw the after-tax interest one year into VOO or SPY (or some other broad-market index fund) and just leave it alone alongside her HYSA for a few years, then compare the returns. It's not that high a fraction of her net worth, and importantly to her risk tolerance, it doesn't reduce the nominal value of her HYSA balance to do so. This works better if she doesn't check in with the balance often and get tempted to hit the Sell button during a dip.

If she is attentive to inflation, maybe emphasize that she's essentially paying something like 2% (HYSA nominal return * marginal tax rate) of its value, and that's a risk, too! That risk scales with inflation, the early 2020s showed us that inflation isn't a relic of the past, and the 1970s showed us that it doesn't have to last only a couple years. Diversifying holdings out of any single asset class is usually a good bet for reducing the total risk surface, especially since there are always Rummy's Unknown Unknowns to contend with.

First, say a prayer of thanks that she's dispositionally a saver.

I do that pretty much every day.

Since she's aware of inflation, I've been gently pushing the idea of SGOV to her. I'm emphasizing the fact that her bank is likely using treasuries to fund the interest on her HYSA, so buying SGOV just cuts out the middle man. My hope is that if she can see it grow for a while without any catastrophes, she might accept more risk and investments that have a longer time horizon.

I do that pretty much every day.

Smart man.

Since she's aware of inflation...

I was trying to get at more something like this: does the idea of inflation eat away at her like the actual inflation eats away at her savings? Is it visceral? If she's generally got a low risk tolerance, savings is primarily providing an element of security to her psyche (as opposed to, say, opportunity), and explicitly orienting her portfolio around serving that purpose, with risk viewed as comprehensively as possible, is likely both the best end state for her investment approach and the conversational approach to move her in that direction.

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