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Wednesday, October 22, 2008

The Stock Market: Oy and Veh!

NASDAQ in Times Square, New York City.Image via WikipediaIt's been quite a rollercoaster the past week or so. Despite our debt problems, we do have a substantial stash saved for retirement...or we did.

But I am not panicking. I checked my asset allocation (what percentage stocks is in stocks, what percentage is in fixed income investments like bonds, what percentage is in cash.) Even with the market plummeting, I'm over-invested in stocks for my age.

I think common wisdom still applies. If you need the money soon, it should be in cash or cash equivalents. If you need in within 10 years, it should be in fixed income investments. Beyond that, the stock market is where I'd keep mine. I'm pretty sure the market will go up in ten years, more than what I could make on "safer" investments.

If I had any money, I'd be buying now. Warren Buffet is. He says.
A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful.

Dana Levit, a Massachusetts financial advisor on NPR's Here and Now had another good piece of advice yesterday. Everybody, she noted, knows they should have six months living expenses in cash for emergencies like health problems and unemployment. But nobody does it. And young people are less likely than others to have that safety net. So young people should actually have more in cash then the conventiontial wisdom would suggest.

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