Читать книгу More Straight Talk on Investing - John J. Brennan - Страница 20

You may think of cash as the bills in your wallet, your Venmo balance, or change in your car's cup holder, but it's something a little different in investing. Cash investments are very short-term IOUs issued by governments, corporations, banks, or other financial institutions. Bank deposit accounts and money market mutual funds are among the most popular forms of cash investments. Cash investments have been the least volatile of the three major asset classes historically, which means they are a safer choice than stocks or bonds if your biggest priority is not losing money. But they have also provided the lowest returns. Cash investments are said to have good liquidity because it's generally possible to withdraw your cash immediately and without penalty, but their disadvantage is that they will provide a return that keeps you just about in line or maybe slightly above inflation. While cash investments are a useful vehicle for emergency funds or money that will be needed just around the corner, they don't belong in your long-term investment account.

As you can see, there are trade-offs with each of the asset classes, so you'll need to set your objectives before deciding how to invest. If you want to reach for the greater potential returns that are offered by stocks, you must be willing to also accept their increased risk. If you want to opt for the greater safety of cash instruments, you must be willing to accept lower returns.

You need to know a little about some of the places to invest, including banks, mutual fund providers, financial advisors, and brokerage firms. You'll need to understand the benefits of tax-advantaged accounts, such as IRAs and 401(k) plans. In this book, I'll explain why mutual funds and exchange-traded funds (ETFs) are the best long-term investment vehicles for the bulk of your serious money. Chapter 8 is devoted to a full explanation of funds and ETFs.

You need to know what risk means. And here's a case where many people assume they already know all about it. But as we'll see, in investing, the obvious risk isn't always the most dangerous one.

You need to know yourself as an investor. You can make all kinds of wise investments and adhere to a sound long-term strategy, but still find yourself unable to sleep at night for worry when the markets are down. Life is too short for that! There are many ways for you to invest at a level of risk with which you can live, and I'll be discussing them in Chapter 11.