Keeping a cash cushion gives you courage to handle portfolio risk
by John Coumarianos
Market Watch
If you’re too scared to invest in the markets right now, you’re not alone.
Recently I did a radio interview about my MarketWatch story comparing the current global economy to that of the 1930s. At the end, the interviewer asked for an investment recommendation, and added (for dramatic effect) he was too scared to do anything but put his money under his mattress.
I did what I always do in situations where I’m speaking to people I can’t counsel on an ongoing basis: I recommended the Vanguard Balanced Index Fund. After all, a 60% stock / 40% bond portfolio is tried and true, and the Vanguard fund’s rock-bottom expense ratio of 0.23% gives it a cost advantage over its peers. Cash under your mattress, I explained, is a loser because it can’t keep up with inflation over the long haul.