[horsawlarway]

I also disagree with his take here, but I think there is some merit to the advice of "understand what you've invested in".

It's fairly hard to personally evaluate companies in a fund - it is somewhat easier to evaluate a single company (or even 10 single companies).

If I assume he means "~40% of non-retirement emergency funds" I can let this skate by.

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I also think there's some risk to index funds precisely because they appear like such low-risk investments. If the majority of investments are in index funds, I suspect there are systemic risks that we just don't understand very well yet, because the vehicle is so young. Whether that's low liquidity, poor capital allocation, fraud, etc - it's hard to say exactly what risks come with that market structure, since we have no real history to look at.

(side note - I'm about 80% invested in index funds... so certainly don't read this as me recommending against them)

[skybrian]

It seems like Berkshire Hathaway would be as hard to evaluate as an index fund. For example, do you understand or even know the other companies they are invested in? At the same time, they are probably more diversified than most mutual funds.

[horsawlarway]

Sure - if you pick an investing conglomerate like berkshire, evaluation is still hard.

It's less difficult (although still not a breeze) for companies like Tyson, John Deere, Cargill, etc. If you pick a major manufacturing company near you, that's producing non-luxury goods or essential goods, you can expect to have a reasonable idea of how they'll hold their value in adverse market conditions.

I want to be really clear - I'm assuming ALL of the advice in this article is "disaster planning" advice. It's not going to maximize returns, but it can give you ownership of an asset that is likely to survive things like rapid inflation, or other unexpected series of events.

Maximizing returns is often counter to this idea - because it almost always implies taking on additional risk, which is not ideal for disaster scenarios.