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Dollars & Sense: Investing: Back to Basics – Version 2.0

By Roberta L. Nestor

While it may appear that everything is different and the entire world has changed, some things will always remain the same, especially when it comes to basic savings and investments.

Start with the adage of “Pay Yourself First”.  Very simply you should be paying into your 401k or other retirement accounts first before you pay anything else.  This concept can also be applied to the “50/30/20 Rule”.  The basic rule is to take 50% of each net paycheck and use that for your needs, 30% to be used for wants and a whopping 20% for savings.

How fast will my money double?

While the math has not changed for the Rule of 72, in this low or zero interest rate environment the number of years certainly has.  You take your rate of interest, divided by 72 and that will tell you how many years it will take to double your money.  Hypothetically, if you were earning 10%, it would take 7.2 years.  Think about bank rates of 1%, and it would take 72 years to double your funds.

What percentage of my investments should be invested in equities?

Risk tolerance aside, the rule of thumb has always been to take 100 minus your age and that would represent how much you should have in equities.  It is a good rule of thumb; however, with longer life expectancies in the US, many are reconsidering this rule to use 110 minus your age.  Think about it.  In 1960, the average life expectancy for an American was 69.77 years.  Now the average US life expectancy is up to 78.6 years.

How much money should I have for emergencies?

While the size of your emergency fund will vary depending on your monthly expenses, lifestyle, income and dependents, the rule of thumb here is to put at least 3 to 6 months’ worth of expenses aside for unforeseen emergencies.  I believe the COVID pandemic (which is now nearing 5 months in the US) really put a spotlight on this rule of thumb, especially for small businesses.  Individuals should make having at least 6 months of funds a priority in this new environment.

Should I take my money out of the market until things get better?

As told, investors pulled $71 billion from US equities since COVID, but was it a wise move (Source:  Morningstar Direct June 30, 2020 Report)?  As of June 30th, investors who sold their equity holdings at the bottom of the market in late March would have missed out on the 39.90% rebound measured by the S & P 500.

History says that if you check the market daily, you are likely to see a negative return 46% of the time; however, if you checked this less frequently, seeing a negative return also becomes less frequent.  While it is important to monitor your investments, reducing the number of times you check your accounts can help lower the tendency to make an impulsive move.  Consider your home as an investment.  The housing market experiences frequent swings in value; it is extremely rare that someone would check the value of their home daily.

Navigating finances in today’s environment is difficult at best.  Now, more than ever, you need a financial professional to help guide you through these difficult and uncertain times.

Roberta L. Nestor is a financial advisor practicing at 759 Boston Post Road in Milford, CT offering retirement, long term care, investment, and tax planning services.  She offers securities and advisory services as a Registered Representative and Investment Adviser Representative of Commonwealth Financial Network – a member FINRA/SIPC and a Registered Investment Adviser.  Fixed insurance products offered through Nestor Financial Network are separate and unrelated to Commonwealth.  Commonwealth Financial Network or Nestor Financial Network does not provide legal or tax advice.  You should consult a legal or tax professional regarding your individual situation.  Roberta can be reached at Nestor Financial Network, 203-876-8066 or

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