Why saving is for suckers

Central bankers and government officials have been trying to make the public think they are going to end the first part of this crazy game soon by raising interest rates as soon as the economy shows a hint of stabilizing. That is why Federal Reserve chief Ben Bernanke and his band of regional Fed governors have hit the lecture circuit in recent weeks to give speeches at a stunning pace. But their comments are really just a smoke screen, as I have mentioned before, because these guys really have no intention of raising rates until substantial employment growth has been under way for several months, and that might not happen until the end of next year at the earliest.

A simple plan

Putting it all together, Reynolds thinks the evidence suggests we are still in the very early stages of the credit cycle, similar to the first seven months of the 1991-2000 period or the 2003-07 period. In those time spans, people who were simply saving excess cash in passbook or money market accounts at banks were throwing money at bankers with virtually no tangible benefit to themselves.Different times call for different strategies. Last year you were a sucker if you were long on stocks. This year you're a sucker if you're not. My suggestion is that you participate in the recovery of the global economy right along with the fat cats, instead of serving as their financing vehicle. Despite the recent advance off the March lows, stocks and corporate bonds are still inexpensive relative to the sharp recovery that likely lies ahead.

I've written a lot of columns over the past seven months with specific recommendations. But if you haven't started yet and want to get involved again with stocks -- after all of your family, business and tax requirements are met, of course -- then consider starting with a very simple strategy first and adding more complexity later.

A good, inexpensive exchange-traded fund to start with is Vanguard Total World Stock (VT, news, msgs), with an expense ratio of only 0.3%. It gives you exposure to all large and medium-sized companies in the world's developed markets. To add a little more risk -- and thus, hopefully, return -- add small companies with SPDR International Small Cap (GWX, news, msgs). To creep out a little further on the risk spectrum, add iShares Emerging Markets (EEM, news, msgs). And finally, to add bonds as ballast, add iShares Investment Grade Corporate Bond (LQD, news, msgs).

Keep it simple. Adding sectors and specific regions will increase the complexity of your portfolio but probably won't add much more in returns, which could well exceed 15% per year after the recent crash in value.

These are not buy-and-hold-forever ideas, because cycles will change. And they won't go straight up. There will be long periods of sideways motion or bumpiness. But the fiscal and monetary stimuli poured into the global financial system over the past year, as explained two weeks ago, will more than likely lead to a prolonged recovery of at least a year and more likely two or three or more.

For that period, investing will get you a lot farther than saving.

Fine print

To learn more about WJB Capital Group analyst Brian Reynolds, visit his company's Web site. To learn more about Vanguard ETFs, click here. To learn about iShares ETFs, click here. To check out my daily investment newsletter, featuring active ETF and stock portfolios, click here.

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