If the stock market were to crash…say, worse than 2008, where should one have their money? And, assuming they don’t care they’re missing out on any gains beforehand …they just want to preserve what they have. Gold/Silver? My husband and I are split on this topic. I’m 52yrs and he’s 55. We have about $900,000 in savings (IRA’s, stocks etc with a financial advisor).

Terry Says:   Whew — that’s the essence of all investing, figuring out how to avoid a disaster!  So let’s start by defining “crash” and defining your risk tolerance.  Yes, for sure, one day the stock market will fall dramatically.  The value of the S&P was about cut in half in 1l73-74, and also in 2008-2009 — and there were huge declines at various times  in between those two major crashes.  Anyone who sold out during those crashes and is here today to think about it is probably sorry they sold near or at the bottom.

A lot depends on your time horizon. I have often noted that, according to Morningstar/Ibbotson, there has never been a 20 year period where you would have lost money in a diversified portfolio of large-company American stocks with dividends reinvested, even adjusted for inflation.  That goes back to 1926.  No 20-year period.  So if you have a 20-year time horizon, and a plan to keep investing regularly, you can view market declines as a chance to buy more shares for the same dollar investment.   And if you believe in the future of America and if you have a 20-year time horizon, you could reasonably expect to come out ahead.

Now, let’s look at YOUR situation.  You are at least 10 years away from retirement — the point at which not only will  you not be contributing, but you might start to need to withdraw money to live on.  So that means you have to be more conservative.  How much more conservative?  That’s not a matter for guesswork.  You need to do some serious “modeling” – -and I recommend going to Fidelity or Vanguard or T. Rowe Price and asking them to do “monte carlo modeling” for your current investment and future retirement withdrawal needs.  That is the “scientific” way to answer the question.

Yes, you need to keep some money in the stock market for future growth and to offset any future inflation.  Yes, you should have a small amount of gold  (stocks) to hedge against both future inflation, and international discord, and yes, you should have some money in bonds.  AND, you should have liquidity — which means leaving some in a money market account where you earn NOTHING but also where you LOSE nothing! (Especially since we have no inflation these days.)  That is BALANCE.  But the most appropriate balance for your situation is not something to debate over dinner.  It requires the kind of computer modeling I mentioned.  And it’s free from these sources if you have some money in their funds!

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