Are you brave enough to hold your emergency savings in an investment portfolio of stocks and bonds? While some studies suggest it can be a better deal for your finances, plenty of financial planners — and their clients — say it’s a no-go.
Ironically, with interest rates at rock-bottom lows, some might argue it takes more courage to stash savings in a bank account that’s losing money to inflation than to invest it in the volatile stock market.
One recent study found that investing emergency savings in a portfolio of 60% stocks and 40% bonds rather than in cash led to a better outcome — more money at retirement — even after financial shocks like a job loss.
“The traditional recommendation of a cash-only reserve emergency fund strategy is likely to reduce wealth over a lifetime,” the study’s authors said. Read the full study in the Journal of Financial Planning.
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