Young investors are hoarding cash

People in their early to mid-thirties, with money to invest, are keeping nearly half -- 42% -- under the mattress, in cash.

(Money Magazine)

Or they're realistic: When your career has been dominated by the Great Recession, you know the value of a cash buffer.

So what's the right cash stake? How to decide -- and what to do once you have enough:

Be cash savvy

Have expenses covered. Financial planner Mary Beth Storjohann, who specializes in working with younger investors, says that to get through an unexpected job loss, you should set aside three to six months of living expenses in cash.

Quiz: Road to Wealth -- Are you on track?

Focus on the big picture. Of course, some savers may be holding cash not because they want an emergency reserve, but because they are anxious about volatile markets.

For young investors, though, these numbers put that risk in perspective: Over periods of 30 years, stocks have never lost money and outperformed cash-like short-term Treasuries by an annualized average of 7 percentage points.

Related: Stocks, bonds? In 2014, think cash

Keep it simple. If you've been out of the market, the number of investment choices for getting back in may be overwhelming. One broadly diversified index fund, such as MONEY 50 pick Schwab Total Stock Market Index (SWTSX), gets you a solid portfolio with little fuss and low costs.

First Published: April 9, 2014: 4:32 PM ET

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