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In Today's Market, Where Do You Put Your Cash?
Townhall.com ^ | June 24, 2009 | Carrie Schwab Pomerantz

Posted on 06/24/2009 4:25:32 AM PDT by Kaslin

Dear Carrie: Considering the state of the economy at this time, what is the best place -- for safety and growth -- to invest available cash? -- A Reader

Dear Reader: You're really asking two questions: What's the best place to invest for safety? And what's the best place to invest for growth? Unfortunately, there is no single answer to both these questions. In fact, it's one of the most fundamental facts of life for investors: Growth entails risk; safety means avoiding risk. Growth and safety are fundamentally different investment objectives, and they demand different investment strategies. So instead of looking for one "best place" to invest now, I suggest you identify your investment objectives and your attitude about risk to help you build and manage your portfolio.

Start with the key question for every investor: What are your investment goals and their associated time horizons? Are you investing for long-term goals like retirement or college expenses for your children? Or do you have more near-term objectives like saving up for the down payment on your first home or maybe just putting aside cash for a rainy day? (Regardless of your long-term goals, an emergency fund can represent an important safety net for anyone. I suggest setting aside enough money to cover three to six months' worth of living expense -- perhaps even more if you're nearing retirement or worried that you could lose your job.)

Second, what is your tolerance for risk? Most investors know the connection between risk and reward, and know they need to embrace a certain amount of risk to generate growth over the long term, especially taking inflation into account. Still, it's important to know how much volatility you can handle.

When you've answered these questions, you can begin to think about your overall portfolio and make some intelligent decisions about the kind of investments that are most appropriate. You'll probably have several goals with different horizons, and your challenge will be to invest accordingly.

For example, most investors keep their "rainy day" money in something relatively safe; for example, a money market account or an interest-bearing savings or checking account. Another possibility are certificates of deposit, which are also FDIC-insured and can offer better yields -- but at the cost of tying up your funds for the fixed term.

If you have mid-term goals -- say you're planning to buy a home in three to five years and are saving for the down payment -- then you might consider taking a little more risk in pursuit of a little more reward. Municipal bonds and high-grade corporate bonds might be appropriate (you'll want to make sure the credit quality is high). Obviously, Treasury securities have less default risk, but they currently offer so little return that they are less attractive.

For longer-term goals, I would suggest you consider investing in the stock market. Why? Because historically, stocks have delivered the highest long-term returns (from 1970 to 2008, large-cap stocks generated an average compound annual growth rate of 9.5 percent). Looking ahead, while most experts agree that we likely won't be seeing this level of return, we can reasonably expect stocks to outperform bonds and cash investments over the next 20 years.

There are multiple ways to invest in stocks -- index funds, actively managed mutual funds, exchange-traded funds and individual stocks -- but keep in mind the basic requirements of any portfolio: a high degree of diversification and low costs. Building your own portfolio is something you can do yourself or with the help of an objective advisor who understands your goals, time horizon and risk tolerance (and is committed to keeping costs down). And I should reiterate here the idea of taking the long-term view. The inevitable short-term ups and downs of the markets become much less important over a period of several years or a few decades. Successful investors don't let today's market environment affect their long-term investment decisions.

There generally isn't a single answer to the question "Where should I put my money now?" But if you start from a position of knowledge -- understanding your financial goals and your tolerance for risk -- you'll have a head start on making sound decisions. Finally, remember that your situation is dynamic, as are the markets, so be sure to monitor your performance at least annually, and adjust your portfolio accordingly.


TOPICS: Business/Economy; Editorial
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1 posted on 06/24/2009 4:25:32 AM PDT by Kaslin
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To: Kaslin

This sounds like the same advice one would receive before the crash. I don’t know that I trust it one bit.


2 posted on 06/24/2009 4:29:10 AM PDT by keats5 (Not all of us are hypnotized.)
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To: keats5
This sounds like the same advice one would receive before the crash. I don’t know that I trust it one bit.

Yeah, the same equivocating and qualified answers they've been putting out for years.

3 posted on 06/24/2009 4:31:31 AM PDT by raybbr (It's going to get a lot worse now that the anchor babies are voting!)
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To: Kaslin

“In Today’s Market, Where Do You Put Your Cash?”

Bullets and seeds...maybe a chicken and a cow.


4 posted on 06/24/2009 4:31:46 AM PDT by MestaMachine (Evil exists, but cannot act without willing participants. Obama participates.)
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To: Kaslin
In Today's Market, Where Do You Put Your Cash?
buy guns and ammunition
5 posted on 06/24/2009 4:32:55 AM PDT by usmcobra (Your chances of dying in bed are reduced by getting out of it, but most people still die in bed)
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To: keats5

If I were under forty-five I would be buying solid, consumer oriented, dividend paying stocks like Coke and Kraft with some gold as a hedge against inflation.


6 posted on 06/24/2009 4:33:44 AM PDT by wtc911 ("How you gonna get back down that hill?")
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To: Kaslin

It has just been proven that paper is an extremely risky investment. I lost about 50% last year, and I see no way to come close to making it up before retirement. Governments give and governments take away, and their actions, especially last year, led to the huge losses. They’re now planning a period of inflation, so that would continue making this a horrible time to invest in paper.

I’d look for something real that has lasting or intrinsic value. If I couldn’t handle the idea of precious metals, and if real estate were still inflated, I’d seriously consider investing in my own ability to raise money.

The best eternal investment is Christ, but the best financial investment right now is not paper.


7 posted on 06/24/2009 4:36:01 AM PDT by xzins (Chaplain Says: Jesus befriends those who seek His help.)
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To: Kaslin

8 posted on 06/24/2009 4:39:21 AM PDT by ETL (ALL the Obama-commie connections at my FR Home page: http://www.freerepublic.com/~etl/)
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To: Kaslin

I wouldn’t invest in anything right now, except for ammo.


9 posted on 06/24/2009 4:42:07 AM PDT by KoRn (Department of Homeland Security, Certified - "Right Wing Extremist")
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To: Kaslin
This is simply boilerplate investment advice, applicable to normal economic circumstances, in which one may rationally measure one's objective, risk tolerance, and investment time horizon.

A better question might have been: "Where do you put your cash in an age when the Federal government is nationalizing industries, printing trillions of unsecured dollars, de-funding our national defense, and raising taxes on producers while promoting mass dependency?"

The answer to which might be: Canned non-perishable food, bottled water, storable fuels, paper products, warm clothing, guns, and ammunition.

10 posted on 06/24/2009 4:42:13 AM PDT by andy58-in-nh (You have enemies? Good. That means you've stood up for something, sometime in your life.)
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To: xzins

>>They’re now planning a period of inflation, so that would continue making this a horrible time to invest in paper.

If you believe that, then equity ownership in commodity producers would make for excellent investments.


11 posted on 06/24/2009 4:43:49 AM PDT by oblomov (Every election is a sort of advance auction sale of stolen goods. - Mencken)
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To: Kaslin

IMO, in the present environment, one should pay off all debts as quickly as possible.


12 posted on 06/24/2009 4:45:34 AM PDT by oblomov (Every election is a sort of advance auction sale of stolen goods. - Mencken)
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To: Kaslin
More mumbo jumbo.

As the market continues on its downward slide none have the guts to be truthful. As long as they get their cut for putting you in losers they continue their spiel.

13 posted on 06/24/2009 4:45:59 AM PDT by sausageseller (http://coolblue.typepad.com/the_cool_blue_blog/)
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To: Kaslin

ping


14 posted on 06/24/2009 4:50:38 AM PDT by Ulysse
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To: raybbr; keats5
This sounds like the same advice one would receive before the crash. I don’t know that I trust it one bit.

Yeah, the same equivocating and qualified answers they've been putting out for years.

And this is the same answer so many chose to ignore

And this is the same answer so many avoided doing

My only complaint with this answer...monitor your investments annually. Not in this market, one needs to be looking at their investments and the information on those investments at least monthly. The market is far to volatile still.

After that the advice is still good, sound, and valuable. Part of me really doesn't feel sorry for the folks who invested in the markets etc. and then ignored their investments. I actually had a friend last October tell me they were trying not look at their investment losses!!

When the penalty for getting out is less than the loss?! Ultimately it is you, the investor, who has to make the call. You should not invest above your risk level and that includes taking the risk to get out of a bad investment too. I hear way too many people holding onto bad investments, because their too risk adverse to put it back into cash until they find something better. Instead the idiots chose to continue to lose their money because of some perceived penalty.

15 posted on 06/24/2009 4:50:55 AM PDT by EBH (it is the Right of the People to alter or to abolish it, and to institute a new Government)
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To: All

pay off any debt, (even car/house) to help lower your cash in the banks, but be sure you have enough for living expenses for 6-months/year.

consider bargain real estate.


16 posted on 06/24/2009 4:52:09 AM PDT by CharlotteVRWC
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To: wtc911
Add to that list P&G and you won't go wrong.
17 posted on 06/24/2009 4:55:17 AM PDT by Recon Dad (Cogito cogito ergo cogito sum - MARSOC DAD)
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To: Kaslin
In Today's Market, Where Do You Put Your Cash?

Going to the mattresses. Oh, and ammunition.

18 posted on 06/24/2009 4:57:09 AM PDT by CholeraJoe (Waterboarding isn't torture. Listening to Miley Cyrus is torture.)
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To: Kaslin
It took 25 years for the market to recover from 1925. Are we any better off today? This a traders market, not a long term investors market. Unless you are quick trader, put your money in a CD. Even that is a money looser, but it is safer than keeping cash in your house.
19 posted on 06/24/2009 4:57:53 AM PDT by G-Man 1
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To: EBH
And this is the same answer so many chose to ignore And this is the same answer so many avoided doing My only complaint with this answer...monitor your investments annually. Not in this market, one needs to be looking at their investments and the information on those investments at least monthly. The market is far to volatile still.

One year ago I moved 100% of my 401K into the "Stable Market Fund" of my plan. That was about two weeks after they announced they were closing the company. I have made 2 to 3% since then while almost everyone I know lost 20 to 30 percent. I paid attention and it paid off. But, where do you go from here? I see no real future in the U.S. Not with this a-hole and his cronies in the WH.

20 posted on 06/24/2009 4:59:34 AM PDT by raybbr (It's going to get a lot worse now that the anchor babies are voting!)
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