Kevin-

The statistics say you are very wrong (about stocks and savings).
Should you be in stocks if you want to buy a house next year?
No.
Should you be in stocks if you want to buy a house in five to ten years?
Probably.
Should you be in stocks if you want to fund a retirement in 10 to 30 years?
Most definitely.

Minyan Jeff B.

MJB-

I hope yesterday's comment on the Death of Savings did not suggest that I believe all stock investments are inappropriate. I do not. In fact, I agree with your breakdown in timeframes in very general terms.

Rather, I took exception to the increasingly widespread belief, one that has been decades in the making through both policy and Wall Street marketing, that stock investments are the same as savings.

Clearly, statistics support the long-term upward bias of the stock market (though we’ll put aside survivorship bias and other factors that frequently make the reality less attractive than the ideal for a moment). Equally clear, however, and less attractive and therefore often swept under the rug by those with a vested interest in selling stocks to the public, there have been numerous periods where "saving" through the stock market, even for as long as 10-years, has not produced the intended results.

On the one hand we are talking about individuals timeframes and time preferences.  When discussing this issue with Scott Reamer, he pointed out that during manic periods people often "THINK" they have descreased time preferences, but when they realize their savings are at risk their time preferences increase dramatically and they want to reduce their risk profile right away. 

And timeframe alone does not solve the risk equation. Savings, by definition, is money that one does not wish to lose. The point of my comments yesterday was to highlight the fact that savings have now merged seamlessly into stock market investments without the vast majority of savers even realizing this shift has occurred. That does not make stocks evil, or investors dumb for buying stocks. Stock investments can be appropriate vehicles for long-term growth of capital, but obtaining that growth carries risks, and money that is put away with the intention of saving it is decidedly not appropriate for those risks.

Today this may seem like a petty game of semantics – “savings,” versus “investment.” But I assure you the difference between the two will not be a petty game of semantics when, and I believe it is a matter of when, not if, the day comes that investment risk finally shows itself, and those who have been fooled (some would even go so far as to say forced) into treating their savings as investments pay the price.