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As I’ve already pointed out, some ready assets are necessary for pending expenses, such as college tuition, possible emergencies, or even psychologic… - Burton Malkiel
" "As I’ve already pointed out, some ready assets are necessary for pending expenses, such as college tuition, possible emergencies, or even psychological support. Thus, you have a real dilemma. You know that if you keep your money in a savings bank and get, say, 2 percent interest in a year in which the inflation rate exceeds 2 percent, you will lose real purchasing power. In fact, the situation is even worse because the interest you get is subject to regular income taxes. Moreover, short-term interest rates were abnormally low during the 2010s. So what’s a small saver to do? There are several short-term investments that are likely to help provide the best rate of return, although no very good alternatives exist when interest rates are very low.
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About Burton Malkiel
Burton Gordon Malkiel (born August 28, 1932) is an American economist and writer, most famous for his classic finance book A Random Walk Down Wall Street.
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Burton Gordon Malkiel
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Burton G. Malkiel
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The amount of risk you can tolerate is partly determined by your sleeping point. The next chapter discusses the risks and rewards of stock and bond investing and will help you determine the kinds of returns you should expect from different financial instruments. But the risk you can assume is also significantly influenced by your age and by the sources and dependability of your noninvestment income.
Technology will ultimately greatly improve the intentional payments system. And there will always be advantages to holding an asset that is anonymous and transportable without a physical trace. But the lessons of history are immutable. Speculative bubbles will persist. But they ultimately lead most of their participants to financial ruin. Even real technology revolutions do not guarantee benefits for investors.
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Fraud aside, we should have known better. We should have known that investments in transforming technologies have often proved unrewarding for investors. In the 1850s, the railroad was widely expected to greatly increase the efficiency of communications and commerce. It certainly did so, but it did not justify the prices of railroad stocks, which rose to enormous speculative heights before collapsing in August 1857. A century later, airlines and television manufacturers transformed our country, but most of the early investors lost their shirts. The key to investing is not how much an industry will affect society or even how much it will grow, but rather its ability to make and sustain profits. And history tells us that eventually all excessively exuberant markets succumb to the laws of gravity. The consistent losers in the market, from my personal experience, are those who are unable to resist being swept up in some kind of tulip-bulb craze. It is not hard, really, to make money in the market. As we shall see later, an investor who simply buys and holds a broad-based portfolio of stocks can make reasonably generous long-run returns. What is hard to avoid is the alluring temptation to throw your money away on short, get-rich-quick speculative binges.
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