Area man asks random guy on Internet for investment advice

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Somehow, and partly because we had super-cheap rent in YOUR FORMER HOUSE, and definitely because we never bought a bunch of crap like real estate or “cars made after 1994,” my modest cosmopolitan family was able to save a modest amount of money. For years, the formula worked pretty well: Save the loot in Europe, because the dollar would (and did) collapse for a decade. Occasionally change money to buy things in the U.S., like a baby.

But now, the Europe-money seems to be infected, too. I don’t like “investments,” I don’t like buying anything more expensive than a plane ticket, and Ron Paul won’t let me buy his gold. Also, I’m easily confused. All I want is to park my daughter’s school-lunch money somewhere safe, and maybe occasionally profit from & laugh at the “fat cats.” What is my program? — Matt (not Yglesias) in D.C.

I work as a writer, what the hell do I know about money?

BUT, the best way to hang onto what you have is to continue not buying stuff. And the best place to hide the money you’ve got is in low-cost no-load investment funds from a company that’s known for boring stability, think Vanguard or Fidelity. You can set it up online or have somebody walk you through it. Make sure you reinvest all your dividends (that means “earnings from your funds”) and automatically add to the pile through monthly transfers from your bank, however much you can comfortably afford.

Put as much as you’re allowed into retirement funds and college-education funds, always making sure the expense rates are NEVER more than half a percent — 0.5%. And put as much as you think you’ll need before retirement age (or college age for that baby you bought) in regular holdings at the same low-cost fund company. If you want to buy a house or cash out and move to Ron Paultopia in Belize or wherever, you can sell that stuff and pay the capital gains on your profit, which is the difference between what you put in and what you got when you sold it. So if you bought a thousand dollars in shares of a fund and sold it all for eleven-hundred dollars, you are taxed on the $100 difference, not the original thousand, GET IT?

You can stick to bonds or inflation-protected treasury securities if you want to be very safe and not feel the horrible sadness of watching your stock indexes drop by 40% or 50% every time there’s another financial collapse.

Or you can add maybe half of your pile to stock indexes that track entire markets, like the S&P 500 (a varied bunch of big companies based in America) or solid emerging markets (Asia and South America). And when you’re thinking about buying a house or getting old and retiring or whatever, start moving everything back to nice safe bonds. For the not-too-greedy person who is afraid of gambling, this is the safest way to make some returns on your money and not just lose it to inflation over the years, which is what happens when it sits in a bank making 0.0009% interest. Plus you’re contributing every month and reinvesting whatever earnings, so you’re adding to the pile all the time regardless of what happens to the markets.

(There’s an even easier way to do this, and it’s called a “target-date fund.” It is automatically re-jiggered as you get closer to retirement age or college time, so somebody else remembers to move your riskier stocks and bonds to very conservative cash holdings by the time you need the money. But if you don’t want to ever hold a lot of stocks, pick your own safe-as-milk combination.)

The main thing is to do this right, and then quit thinking about it, except maybe once a year, take a look, see if you want to re-jigger your fractions, maybe the stocks are worth more than your 50% allocation, so you put the difference in bond funds to even things out again, and etc. Really don’t think about it, never watch CNBC, read the business news with restraint and only as a disinterested outsider.

Then maybe dig up all your old 401ks from all your various forgotten jobs with a couple of hundred dollars here or there, and ask the nice people at your new low-cost fund company to help you move those things into one easy IRA made up of low-fee funds divided up the way your other stuff is sliced, with so many percent of bond funds and so many of indexes, etc.

And if you see James Cramer or Larry Kudlow or especially Alan Greenspan wandering around Washington, push them in front of a speeding bus.

Nobody should ever ask me about Money$ again because it is boring. Also never buy a house unless you are ready to keep it for the rest of your life, and the low-rate fixed mortgage plus property tax and insurance is cheaper than your rent, etc.

Rosie O’Donnell or Roseanne Barr? — Andrea in NYC.

This is a difficult choice, but the answer is Rosanne Cash.

Send your important questions to ask.layne@gmail.com. But if you have a REAL problem, call the police or something, as Ken Layne will not really help you at all. This is just a web page on the Internet.