I like a safe investment as much as the next guy. But can anyone give me a good argument on why I should invest in a bond or a savings account that returns less than inflation?
It seems to me that I am guaranteeing myself to lose, if I do that. However, given how many people do this, I wonder if I am missing something.
Of course, I understand the concepts of risk aversion, but again, I can't see how guaranteeing to lose purchasing power reduces risk.
Some people argue they are certain the markets will go down in the short term, and therefore they want to hold off. This seems dubious to me, because people who say that are sometimes "holding off" for many years. Let alone the fact that it's extremely hard for anyone to predict short term market movements, even for professional (maybe especially for professionals?).
@MichaelStum makes a good point that the instant access, risk-free characteristics are good if you need the money. So let me clarify that this question is for the money you have beyond your "reserve fund".