Bernie,
Say it aint so!!! The base of the investment pyramid usually consists of investments in your home, life insurance, pensions, social security, savings accounts, CDs, etc. These are the class of investments where we really DON'T care about the fluctuations of the markets, or in the ups/downs in our job. I tend to agree that bond funds are not suitable for the base of the investment pyramid, but not for the reason you cite. Bond funds, closed or open, are FAR more volatile than people think. Stocks generally DON'T belong in the base of the pyramid. Stocks are in the next level up, and I argue that bond funds stand shoulder to should with the most financially stable companies shares that you can find to form the middle level of your pyramid.
Someone just getting started can take more risk than you or I, but until they secure the base of their investment pyramid (low or zero debt, a home, insurance, a job, an emergency reserve, etc.) they shouldn't be in stocks except to a MINOR degree. This assumes that they can get to a financially secure position in a few years. If not, then they may need to reorder their priorities. I was on the debt machine for FAR too long. My hope is that I will be OFF in about 9 months (except for my mortgage). A reordering of my priorities in the late 80s would have put me in a FAR different position today (some of my current financial worries would be gone, doubtless to be replaced by orders - so no progress there).
Robert |
