The Goldilocks Strategy for Prudent Investors


ARE you saving for retirement but worried about how to handle a sudden, unexpected expense? Or already retired and wondering how best to protect yourself against a stock market loss?

Many people with those fears set aside a so-called rainy-day fund, keeping large sums in their bank accounts or money market funds. This is a costly mistake, rivaled only by the excess fees too many investors pay to high-cost money managers.

When I ask people why they do it, they say things like “in case I wreck my car” or “in case my house burns down” or “in case I have a medical emergency.” But problems of this sort require large cash outlays only if you are not insured. And the remedy for this is to make sure you are adequately insured, rather than create a big rainy-day fund that earns vastly inferior rates of return compared with stocks and intermediate-term bonds…

The Goldilocks Strategy for Prudent Investors

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