Читать книгу Personal Finance After 50 For Dummies - Eric Tyson - Страница 94

When you’re investing for longer-term financial goals such as retirement, be sure to invest in an array of different investments. Diversified investments may include such things as stock mutual funds (both U.S. and international), exchange-traded funds (ETFs), bonds, and, perhaps, real estate.

How you divide your money among these different types of investments is known as asset allocation. Asset allocation need not be complicated or intimidating. As a general rule, you should conduct asset allocation for money invested for the longer term — that is, at least more than five years, though preferably ten or more years. See our advice and recommendations for determining an appropriate asset allocation in Chapter 3.

Before you begin the process of allocating your assets, make sure you have an emergency cash reserve of three to six months’ worth of living expenses. Set aside even more if your income and job are unstable and you don’t have family or friends you could tap for help. Three months’ worth of living expenses, on the other hand, is probably sufficient if your income is safe and stable or you have other resources you can easily tap.

Other investments that you hold outside of retirement accounts, such as stocks, bonds, and mutual funds and ETFs that invest in stocks and bonds, can quickly be converted into cash. However, the problem with considering these investments for emergencies is that because they fluctuate in value, the selling price may be much less than what you paid originally.