Advice for Rachel, and anyone else

In a review of my 2002 book over at goodreads.com, Rachel says, “I couldn’t help but feel like it was dated given the financial crisis of the last few years. I’m curious what kind of investment advice the author would recommend now.”

I’m glad you asked, Rachel! My advice before the crisis was “stay diversified, buy and hold index funds,” and now after the crisis, my advice is . . . wait for it . . . “stay diversified, buy and hold index funds.”

Have a look at my favorite stock fund, for example (the Vanguard Total Stock Market Index):

Notice what happened to the stay-diversified-buy-and-hold investor: That investor had a hair-raising ride to the bottom in 2009, followed by a dramatic recovery over the next two and half years. That is: The investor who followed my advice came out fine. The investor who panicked in the crisis and sold out — well, that investor got a haircut. And, keep in mind, my book came out six years before the crisis.

The deeper message of the book holds up even better. Don’t worry about finances and don’t put them first in your life.

So, would I change anything in light of events that have occurred since 2002? Yes, I would. Mainly this: There are vehicles now available for more completely diversifying against inflation risk, and I recommend them. Prominent among them would be Treasury Inflation-Protected Securities (TIPS), and here’s a Vanguard fund that allows an easy low-cost way to hold them.

Thanks again for asking, Rachel!