Sick of Worrying? Where to Stash Your Cash

Sept. 18, 2008— -- There is an old axiom in the investing world: the greater the risk, the greater the return. But in today's down market, risky investments stand to lose the most amount of money. So what's a nervous investor to do?

Financial planners counsel that in the long run, diversifying your investments – holding everything from stocks to bonds to commodities to cash and more – is still the smartest strategy to get the best long-run returns that will let you afford your retirement, even in a volatile investing climate.

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But if you're looking for a safe place to stash your cash in the short term and are willing to accept minimal returns, and run the risk of missing out when and if the markets do rebound, here are some options.

Savings and Checking Accounts

Chances are you're already making use of this haven: a savings or checking account at your bank.

"It's the safest place out there right now," said Katie B. Weigel, the founder and managing director of LongPoint Financial Planning in Concord, Mass. "Hold on to your cash, put it in a savings account…I think that's the simple answer."

There has been a lot of news about commercial bank failures recently -- and 11 have shut their doors so far this year -- but most deposits in bank checking and savings accounts are insured.

Since the Federal Deposit Insurance Corporation, more commonly referred to as the FDIC, was established 75 years ago, no consumer has ever lost a penny of their insured deposit at an FDIC-backed institution. The basic insurance protects up to $100,000 in deposits at each institution for each type of ownership category. That means one individual could be insured for up to $100,000 for a single account and another $100,000 in a joint account with a spouse or somebody else. There is also a separate $250,000 insurance limit for retirement accounts, including IRAs, Section 457 plans and Keogh plans.

The biggest downside to checking and savings accounts is that the interest rates they pay may not be enough to beat inflation.