Christine Fahlund, senior financial planner for T. Rowe Price Associates in Baltimore, says she recommends keeping cash equal to two years' worth of living expenses after subtracting income from non-investment sources such as Social Security. He said you should be in the market at all times earning top rates of return. But a lot of people like that peace of mind of plunking something in a money market and knowing it's there. Get a good grip on the kinds of investments you own and the level of risk you are taking. If you own mutual funds, be sure you know how the managers invest your money.
Diversification dramatically reduces risk.
If your portfolio is modestly out of whack, make a gradual shift by redirecting new savings. Even if you decide big changes are necessary, do not sell all your stocks at what could be close to a market bottom. If your retirement dreams depend on a 20 percent annual investment return, it's time for a reality check. St. Petersburg Times. All rights reserved.