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Mattress Risk vs. Asset Allocation

Incredible story underway  in Israel about what Vanguard’s head of Investment Counseling and Research group, John Ameriks, calls “Mattress Risk“.

Here’s the jaw-dropping story from CNN:

A woman in Tel Aviv, Israel, gave her elderly mother a new mattress as a surprise gift, throwing out the old tattered bed her mother had slept on for decades. The gesture ended up bankrupting Annat’s mother, who had stuffed her savings of nearly $1 million inside her old bed for decades, Annat told Israel Army Radio.

Ouch.

The more I think about it, the more it hurts.

Without assigning blame, Ameriks draws a lesson for investors from this incident:

The bottom line: There are always risks out there, and avoiding the risks of investing—or even avoiding doing business with others generally—doesn’t mean you’ve done away with risk.