Especially in these tight times that will likely be with us for the foreseeable future, whatever savings we have should be invested wisely.
Fortunately, it's far easier than financial advisers--who make their money by making us feel we need them--would have us believe.
Even many sophisticated investment advisers agree that the following no-brains-required strategy is likely to, over the long run, yield better results than most investors obtain using strategies that are far more time-consuming, anxiety-provoking, and requiring great expertise or paying a hefty fee to a financial adviser.
1. Keep most of your money in a low-cost, no-load mutual fund. They offer greater potential rewards than a bank CD but with greater risk. One of the best is a Vanguard All-in-One Fund. Those come in different flavors depending on your risk tolerance and how long you plan to keep your money invested.
1a. If you're in the top federal tax bracket (the 35% rate), you might be better off in a tax-managed fund such as the Vanguard Tax-Managed Capital Appreciation Fund or the less aggressive Vanguard Tax-Managed Balanced Fund.
Do not try to time the market. Every time you have an extra $500-$2,500 to invest, do so that day. That way, your money goes to work for you immediately. Also, that automatically buys you more shares when prices are low, fewer when prices are high.
2. Keep an amount equal to six months living expenses in one of the nation's highest yielding bank CDs. How do you find them? Easy: bankrate.com lists them daily. It feels great to see your savings grow. It's like magic--you earn interest on your interest. That's making money without having to do a thing--and with bank CDs, there's essentially no risk, especially if you choose one of the banks with a high safety rating.
2a. If you're in the top federal tax bracket (the 35% rate), you might be better off in a Vanguard tax-exempt bond fund. than in a bank CD.
I believe that all citizens should be taught that model of investing. It would likely result in more net assets for the public, more confidence that it's worth saving for a rainy day, and a greater sense of security, something we could all use in these insecure times.
Disclaimer: I am not a professional investment adviser and thus am NOT giving investment advice here. This merely is a model I've used in my investing. Also, except for the bank CDs, please note that these are uninsured investments and subject to losses. Finally, I am not affiliated with the companies mentioned in this article and have nothing to gain from your investing in them.