While this story sounds unusual, a Marist College poll conducted in 2012 found that 11% of people keep cash under their mattress, as well as in the freezer, cookie jars and the sock drawer.

I actually do recommend keeping some amount of cash in your house for emergencies, such as blackouts that affect ATM and credit card networks. But I wouldn’t keep it under the mattress. Instead, I recommend a home safe in which you can also stow jewelry, passports and other valuables.

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And yet, I still recommend bonds. Charlie Munger, Warren Buffett’s longtime partner, helps explain why. He often says, “The first rule of compounding is to never interrupt it unnecessarily.” But that’s sometimes easier said than done. When the market drops, many investors become more cautious and reduce their stock market holdings, thus violating Munger’s rule.

That is where bonds can be helpful. If you have enough funds stashed safely in FDIC- insured cash and short-term government-backed bonds, that can help give you the fortitude to ride out stock market downturns. That, in my opinion, is the most important role of bonds.

In other words, don’t look at bonds as an instrument to help you make money in and of themselves. Instead, look at them as playing a key supporting role to your stock portfolio, so it can continue growing uninterrupted through thick and thin.

I hope you find this a useful and enjoyable resource.

Best regards,
Adam Grossman

The 2026 Investor's Bookshelf Reading List

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This is an important point. For most people, there is a range of asset allocations that will meet their needs from a strictly mathematical point of view. To choose among those viable portfolio options, you then need to set aside the calculator and consult your tolerance for risk and volatility. That will help ensure you can stick with your portfolio through the market’s regular ups and downs.

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The conventional wisdom is that you should hold onto Roth accounts for as long as possible, giving them more time to continue growing tax-free. But there is one situation in which I think it makes sense to tap Roth IRAs early: If you are married, and one spouse retires before the other, you may want to access some of your investment assets while one spouse is still working.

In that situation, it might be more tax advantageous to withdraw from your Roth accounts. That will help to hold down your taxable income during those years.

As you may know, you can start benefits at any point between age 62 and 70. For each year that you wait, you’ll of course give up a year of benefits. But your benefit will also increase, by about 8% for each year that you wait. And that increase applies for life. For that reason, in the absence of known health issues, I generally recommend delaying until age 70.

But there is at least one situation in which it does not make sense to wait until 70: If you are married and are the lower-earning spouse, your spousal benefit may be larger than the benefit based on your own earning record. If that’s the case, then you’ll certainly want to claim the larger spousal benefit. But keep in mind that spousal benefits do not continue increasing beyond one’s full retirement age.

But there is one key reason why I don’t recommend going out of your way to overweight high-dividend stocks: With only a few exceptions, companies that pay high dividends tend to be mature, slower-growing companies. Yes, you want to have a diversified portfolio—including mature companies—but I don’t see a need to include an extra dose of these companies.

The conventional wisdom is that you’ll certainly spend less, especially if your home is paid off and tuition obligations are behind you. But the key question is: How much less?

A 2005 study by a fellow named Ty Bernicke argued that the average 75-year-old spends 50% less than the average 45-54 year old. Because it was such a surprisingly large figure, this study is frequently cited. But others have criticized Bernicke’s methodology and believe that he is presenting an overly rosy picture.

What’s the solution? In my view, the best starting point for estimating a retirement budget is to work from your budget during your working years. Then go through your spending categories and make adjustments. While that might sound tedious, I believe the result will be far closer to reality than these very general studies.

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Whole life insurance combines two products into one: life insurance and a tax-deferred investment account. The result, in my experience, is that whole life policyholders end up paying more than necessary for too little coverage.

But there are a few limited cases in which whole life insurance can make sense. The clearest example, in my opinion, is a privately-owned business. In that situation, whole life insurance could be used to pay estate taxes. Or in the case of a partnership, a whole life policy could fund the buyout if one partner dies.

But aside from those narrow uses, I think the benefits of whole life insurance are oversold.

1. The investments that are most susceptible to this effect are the ones that are the most frequently talked about—on the news and in conversation among investors. Because of their popularity, these investments can become overpriced. That’s why Warren Buffett often says, “What the wise man does in the beginning, the fool does in the end.”

2. There’s a common belief that “the market” is intelligent or that “the market” knows something. I once heard a professional investor say, “The market is telling us something.” The flaw in this logic is that the market is simply a collection of other individuals and, because of that, it is not endowed with any special wisdom or insight.

As its name suggests, Recency Bias is our minds’ tendency to put disproportionate weight on events that have happened most recently. In simple terms, this is why, when the market is going up, it’s hard to imagine a downturn. And when it’s going down, it’s hard to imagine it ever turning positive again. Our minds are very good at simply extrapolating from recent experience.

This is why I think it’s so important to study market history. It can help you maintain perspective when the market is at an extreme.

This has been great for Amazon shareholders, but it also poses a challenge. Amazon is now a proof point for those arguing in favor of any stock that appears overpriced. After all, with certain assumptions, any stock can be made to appear reasonable. But in most cases, overpriced stocks are just that—overpriced.

Investment manager Rob Arnott captured this idea when he said, in reference to Tesla, “Its shares are not just priced for eternity; they are priced for the hereafter.” In other words, the share price only makes sense if you assume they will continue growing at their current rate for an extraordinarily long time.

Sure, you might get lucky and end up with another Amazon, but in general, it’s safer not to bet on lightning striking twice.

One way to help avoid errors in investing is to keep things simple, and in my view, simplicity should be a key pillar in building a portfolio. But it’s not easy. That’s because there are multiple, powerful forces that favor complexity over simplicity. I see at least five.

For starters, the investment industry prefers complexity for its own reasons. In addition to the thousands of individual stocks, there are nearly 8,000 mutual funds, each offered in an average of three share classes, resulting in a total of 24,000 different individual mutual fund options. Investment markets have been diced in every conceivable way, and yet fund companies continue to develop new products every year. Why? Because mutual fund companies are like any other kind of company; to stay competitive, they need to create new variations on their products each year.

The lesson: Recognize why these companies are creating new investment options. In my opinion, it’s to serve their needs, not yours.

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Let’s start at February 20th, which was when the stock market started to falter. At first, bonds were behaving in character, rising as the stock market was falling. For the first few weeks, between February 20 and March 6, while the stock market was falling, the bond market rose—just as expected. But then, over the following week, as the stock market’s losses deepened, the bond market started to decline too. In all, the bond market lost nearly 9% in just that one week.

Certain areas of the bond market fared especially poorly. Over the one-month period between February 19 and March 19, short-term corporate bonds lost 12%, and high-yield (aka, junk) bonds lost 19%. Even municipal bonds lost 16%. This was probably the biggest surprise. During this period, in fact, the only winner was U.S. Treasury bonds, which rose 2%.

Treasury bonds don’t pay very much, but if history is a guide, they can deliver for investors when it is needed most.

But does that mean you should never deviate from that? If you want to buy an individual stock or invest in a friend’s startup, is that a sin? In short, no.

I sometimes make the analogy to eating habits. Most people can be disciplined most of the time. But if you go to an extreme and try to eat just salad and vegetables at every meal, you’ll eventually go crazy and fall off the wagon in search of french fries or some other junk food.

It’s the same with investing. I like sticking to mostly boring index funds, but if you want to do something a little more interesting every once in a while, I don’t think that’s so bad. And it may allow you to stay more balanced overall.

The lesson? This is an extreme case, but it illustrates a reality about financial planning, and about tax planning in particular: You can never know with certainty what tax rules will be in effect in the future.

So wherever possible, I recommend trying to hedge your bets. For example, if you have the opportunity to contribute to a Roth 401(k), it might be worth giving up the tax benefit in order to accumulate some tax-free funds.

At the same time, some investors advocate for a simple portfolio comprised of just three funds or even just one. So what’s the right answer?

In my view, there is no single “right” answer; there are many ways to construct a sensible portfolio. I wouldn’t get too hung up on whether you have one or three or five or ten funds. What’s more important, in my opinion, is that you have an appropriate asset allocation, broad diversification and low costs.

As English philosopher Carveth Read once wrote, “It is better to be vaguely right than exactly wrong.”

Read was famously frugal. When he came into town, for example, he would park his car several blocks from the town center to avoid having to put coins in the parking meter. That certainly contributed to his ability to amass an $8 million fortune after a career working as a gas station attendant and in other ordinary jobs.

But this headline overlooked a key ingredient in Read’s success: When he died he was 92. He had been investing for decades. And when he received dividends, he always reinvested them. The result was the magic of compound interest.

I don’t want to take anything away from Mr. Read’s investment success, but this is a great illustration of the importance of starting early. If you have a child or a niece or nephew in your life, I always say that the greatest (financial) gift you can give that young person is to explain what a Roth IRA is and to help them get started.

That was one opinion on investment bankers. Several months later, a journalist provided another viewpoint: Goldman Sachs, he wrote, is “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”

So which is it? My view is that, in a lot of ways, both are true. Our financial system is today no better than it was when Fred Schwed satirized it decades ago, except that the greed and the excesses are probably worse today than they were then. But despite that, elements of our financial system have delivered enormous benefits for individual investors. Most notably, the cost of retail mutual funds continues to drop.

As long as you stick to simple and straightforward investments, that makes today’s investment environment, in many respects, the best it’s ever been for investors.

These were the simple investment instructions that he had provided to the trustee: “Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund”

That was it.

Despite Buffett’s being one of the wealthiest people in the world, the portfolio he recommended was remarkably simple—no actively-managed funds, no hedge funds, no private equity or any other seemingly sophisticated investments. Buffett’s view is that it really doesn’t need to be any more complex than that. I agree.