Nest Egg

AAA

DEFINITION of 'Nest Egg'

A substantial sum of money that has been saved or invested for a specific purpose. A nest egg is generally earmarked for longer-term objectives, the most common being retirement, buying a home and education. It can also refer to money kept aside as a reserve to deal with unexpected emergencies such as a medical problem or urgent housing repairs. “Nest egg” has been used to refer to savings since the late 17th century. The term is believed to have been derived from poultry farmers’ tactic of placing eggs – both real and fake – in hens’ nests to induce them to lay more eggs, which meant more income for these farmers.

INVESTOPEDIA EXPLAINS 'Nest Egg'

The foremost investment objective of a nest egg is generally preserving capital, since it represents funds that have been accumulated over a considerable time. However, the portfolio should also have a growth component to offset the effects of inflation over time. A nest egg should typically be invested in relatively conservative instruments such as certificates of deposit, bonds and dividend-paying blue chips. The exact allocation of these securities within a nest egg should be based on asset allocation principles as well as the investor’s risk tolerance and comfort level.
 
It would be folly to invest nest egg proceeds in certain volatile investments in hopes of achieving a high rate of return. These investments include commodities, small-cap stocks and currencies, since their inherent volatility makes them less suited for conservative investing.
 
 

RELATED TERMS
  1. Phases Of Retirement

    A six-stage process described by researcher Robert Atchley that ...
  2. Education IRA

    A savings plan for higher education. Parents and guardians are ...
  3. 529 Plan

    A plan that allows for the prepayment of qualified higher education ...
  4. Coverdell Education Savings Account ...

    A tax-deferred trust account created by the U.S. government to ...
  5. Golden Boot

    An inducement or incentive for an older worker to "voluntarily" ...
  6. Individual Retirement Account - ...

    An investing tool used by individuals to earn and earmark funds ...
Related Articles
  1. Savings

    10 Tips For Achieving Financial Security

    Follow this sound advice and plan for a comfortable future.
  2. Budgeting

    Financial Solutions For Young Women

    Break through the stereotypes and find out how to manage your life to meet your needs.
  3. Retirement

    5 Retirement-Wrecking Moves

    These common mistakes can sabotage your nest egg and your plans for retiring.
  4. Retirement

    Bursting Boomers' Inheritance Dreams

    Waiting for a big payload from an aging relative? The chance of cashing in is lower than you think.
  5. Retirement

    Helping Your Clients Face The Financial Reality Of Retirement

    Altering retirement plans is tough, but when the retiree is unprepared, it's very necessary.
  6. Savings

    5 Ways To Lose Your Retirement Nest Egg

    These common mistakes can put your savings at risk. Find out how to avoid them.
  7. Retirement

    6 Ways To Maximize The Value Of Your 401(k)

    From matching employer contributions to proper asset allocation, we'll tell you how to get the most out of your plan.
  8. Budgeting

    8 Reasons To Never Borrow From Your 401(k)

    Find out why dipping into your future savings can have serious consequences.
  9. Options & Futures

    Need Retirement Income? Sell Your House!

    Discover 10 tips for making a quick sale and a healthy profit.
  10. Retirement

    Boomers: Twisting The Retirement Mindset

    This generation must take a whole new approach to post-work planning.

You May Also Like

Hot Definitions
  1. Christmas Island Dollar

    The former currency of Christmas Island, an Australian island in the Indian Ocean that was discovered on December 25, 1643. ...
  2. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  3. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  4. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  5. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  6. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
Trading Center