‘The advisor told me to put all my money in HYSA rather than stock market’: I’m missing out on potential gains by not investing. How do I balance security with growth?

Hi Money Minder,

So, I’m a 36-year-old dude bringing in 100k a year pre-tax. I’m going all out with saving ($500/week), splitting it between a HYSA (5%) and long term etf (voo,vti).

I chatted with a TIAA advisor about setting up a 401k for my new gig and thought I’d pick his brain about money stuff since I’d never done that before. I mentioned my saving plan and my goal of buying a house, and he suggested putting all my goal-directed funds into HYSA instead of splitting it. So now, everything’s going into HYSA. But, man, can’t shake the feeling that the market’s been on fire this year, up around 20%, despite some dips.

Do you think that advisor is off his rocker? Feels like I’m missing out on a potential 15% gain by not having anything in the market…

Farewell, Money Minder!

Response from THE MONEY MINDER:

"Hello There,"

While it’s important to consider the advice from the TIAA advisor, it’s also crucial to evaluate your financial goals and risk tolerance. Putting all your goal-directed funds into a High-Yield Savings Account (HYSA) provides security and peace of mind, especially if you are saving for a specific short-term goal like buying a house. However, it’s true that you might be missing out on potential market gains by not having any investments in the market. The market can be volatile, as evidenced by recent downturns, but historically it has shown growth over the long term.

A practical approach could be to reassess your investment strategy based on your timeline and risk tolerance. Since you are saving for a house, which is a short-term goal, allocating a portion of your funds into a diversified portfolio of ETFs like VOO and VTI could help you benefit from market growth while being mindful of potential risks. You could consider a balanced approach, where you continue saving in HYSA for your house down payment but also invest a portion in ETFs for long-term wealth accumulation. This way, you can potentially capture market gains while still having a secure savings account for your immediate financial goals.

It’s important to weigh the advice of the advisor with your own financial objectives and comfort level. It may be helpful to have a follow-up conversation with the advisor or seek a second opinion from another financial professional to explore different investment strategies that align with your goals. Remember, achieving financial success is about finding the right balance between risk and reward that works best for you. Good luck on your financial journey!

Farewell from THE MONEY MINDER.