A random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing

Cash Reserves
I know that many brokers will tell you not to miss
investing opportunities by sitting on your cash. “Cash is
trash” is the mantra of the brokerage community. But
everyone needs to keep some reserves in safe and liquid
investments to pay for an unexpected medical bill or to
provide a cushion during a time of unemployment. Assuming
that you are protected by medical and disability insurance at
work, this reserve might be established to cover three months
of living expenses. Moreover, any large future expenditures
(such as your daughter’s college tuition bill) should be funded
with short-term investments (such as a bank certificate of
deposit) whose maturity matches the date on which the funds
will be needed.
Insurance
Most people need insurance. Those with family

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obligations are downright negligent if they don’t purchase
insurance. We risk death every time we get into our
automobile or cross a busy street. A hurricane or fire could
destroy our home and possessions. People need to protect
themselves against the unpredictable.
For individuals, home and auto insurance are a must. So is
health and disability insurance that is generally available from
employers. Life insurance to protect one’s family from the
death of the breadwinner(s) is also a necessity. You don’t
need life insurance if you are single with no dependents. But
if you have a family with young children who count on your
income, you do need life insurance and lots of it.
Two broad categories of life insurance products are
available: high-premium policies that combine insurance with
an investment account, and low-premium term insurance that
provides death benefits only, with no buildup of cash value.
The high-premium policies do have some advantages and
are often touted for their tax-saving benefits. Earnings on the