The idea that you should have a cash reserve equal to three to six months of your living expenses would almost certainly make any “Ten Commandments” list for personal finance.
It might also be one of the least obeyed commandments, as suggested in a recent post by my colleague Ellen Rinaldi. I wholeheartedly agree with Ellen’s emphasis on having a cash reserve—savings stashed in a bank account or money market fund—before getting too focused on investing.
From the Wall Street Journal (subscription required) to the cartoon people interviewed on TV with zippy music, a recent theme in the financial press is that it’s “madness” to build a portfolio using the traditional method of setting an asset allocation and sticking with that strategy through market choppiness. No, these experts say, the market crisis proves you need to day-trade your way to investment success.
Graduation season is upon us. Many of us have children, grandchildren, or acquaintances sailing out of school … and hitting pretty rough seas in the job market.
I had planned to speak to my sons about investing once they graduate. But while investing is undeniably important, I think a better discussion would be around debt management.
My recent blog post on 401(k) accounts has generated controversy among some Vanguard investors.
Perhaps the biggest complaint was that I was trying to distort statistics by focusing on the change in 401(k) account balances during 2008. The evolution of account balances—what economists might call your stock of 401(k) wealth—includes both investment performance and account contributions.
We spent part of last weekend looking for replacements for our old washer and dryer, which definitely were on their last legs. In doing a bit of research before heading for the appliance store, I found an unexpected parallel with investing.
