Q: I am 75 years old and live on my retirement pension. I have a very low tolerance for risk because of losing money in mutual funds, which were professionally managed for me before. I now have approximately $30,000 in cash that is just sitting in my checking account. I want to invest it. However, due to my lackluster trust in the market, I am not sure what to do with it. I am aware of how inflation is eating it away. I am not sure where to invest it -- in what particular product/area that would be relatively safe and meet or beat the inflation rate. Also, you have written that people should get comfortable with the stock market and mutual fund investing, but I don't know how to begin adjusting my comfort level.

Claire M., Coral Gables

A: I must advise you that if this is all you have in liquid assets, you should not consider investing at all, as I believe everyone needs to have some very liquid emergency money to fall back on. All investments that trade, be they stocks, bonds or mutual funds that invest in stocks or bonds, are subject to fluctuations. If you need your money, and the investment you chose happens to be less than what you've invested, you've hurt yourself. If it happens to be up, which is why one invests, then obviously you're OK. Problem is, we can't call the short-term ups and downs of any markets, although some think they can. And we surely can't know when one of those nasty financial surprises that life offers is going to come our way.

For safe and liquid money, I would suggest money-market funds, either in your bank or in money-market mutual funds, and certificates of deposit for six months or a year, depending on where the interest rates are. If you did one third each, then you can roll over your certificates and catch the higher interest rates that are inevitable somewhere down the road. Money markets will keep up with the eventual higher interest rates as well.

Because of the safety you need in investments, chances are they won't keep up with inflation anyway. Only real estate and the stock markets have traditionally done that over the years, but oh, the ride one has to sit still for, as you know. If you're not comfortable, don't invest, because you'll surely get frightened when the next swoop comes, and sell out at the wrong time. And don't search for high yields, fixed annuities or something that sounds too good to be true. Always remember that the return of your investment is more important than the return on your investment. Sometimes, you just need to let inflation take a back seat to comfort and liquidity, especially when funds are limited.

Meg Green is a certified financial planner. Mail questions to her c/o Sunday Business, The Miami Herald, 1 Herald Plaza, Miami FL 33132, or send an e-mail to askmeg@MiamiHerald.com. Include your full name, city of residence.

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