Question: I have saved up about $50K in after tax money that, after selling some battered Stocks recently, is now sitting in Money Market fund. I want to keep about $20K for the rainy day fund and would probably need easy access to $20K of it. I have considered ETFs, Mutual Funds, Bond Funds, TIPS, Money Market Fund, and other such products but cannot make my mind. I am also afraid that if this keeps sitting as is, as the Market picks up, I may venture into Stocks again. Could you advice what are best choices for investing all of this $50K with pros/cons? Vivek, Charlotte, NC

Answer: I don't know what the best investment choice is for your money. Any of the investment choices you mention could make sense, depending on your circumstances and your financial goals. There are plenty of pros and cons to each. But here are three ways of thinking about investments that might help narrow the choice for you.

It's useful every once in awhile to look at your household portfolio as a whole. All of us tend to segregate our money by its purpose--retirement, college, emergency savings, and so forth. Fact is, such "mental accounting" helps us save. But years ago, Jeffrey Schwartz of the asset allocation firm Ibbotson Associates, gave me this example to illustrate the advantage of taking a step back. Let's say you've saved $100,000 in your college education account. Your child is going off to college in five years, and you have divvied up the portfolio into 20% equity and 80% fixed income. You also have $100,000 in a retirement account, split into 75% equities and 25% bonds. The asset allocation in each account sounds about right on its own. But taken all together, your overall asset mix is 52% fixed income and 48% equity. That may be too aggressive overall. It might be too conservative. But a calculation like this is one way to figure out where the money might best shore up your household finances.

What are you trying to accomplish with this savings? Forget the market and the specific investment products. Instead, what are you planning on spending the money on and when? Is this savings eyed for home improvements, college expenses, retirement goals, funding a career shift? The eventual use of the money often dictates the smart way to save it.

While you're mulling over what to do with the money I would keep it as safe as possible. A money market fund that invests primarily in U.S. government securities and federal agency debt is fine. So are buying Treasury bills and FDIC insured CDs. Cash is king during downturns. And it seems that your need to get easy access to the money suggests that these are probably the right kind of investment for you.

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