Six Rules For Lazy Investors

[Sachin]

For all of you who don't obsessively watch CNBC.

http://www.marketwatch.com/news/yhoo/story.asp?source=blq/yhoo&siteid=yhoo&dist=yhoo&guid=%7BF817983D%2D7205%2D448E%2DAAEF%2D046A1C396F92%7D

Sachin

[Pathogen]

Thanks, Sachin. As Maxim Mag would say, you're balls on best.

My father-in-law had a chat with me the other day concerning patient investing. I've been feeling like I'm missing out on some good investments because I don't have a lot of free capitol to invest with. Consequently, I've been making changes to my 401k attempting to catch market trends. Most likely, I've made mistakes in this regard and he cautioned me to be patient, ride the storm, keep putting my 10% in the 401k, and balance my portfolio. Right now I'm too heavily invested in foreign securities.

He advised that if I want to play, take some extra cash flow I do have and throw it in a Roth IRA. He strongly suggested I avoid taking that money and buying individual stocks. All I know is that I don't consider myself that well versed in investing. And I do tend to get impatient. My fear is that I won't have enough for retirement when the time comes.

Either way, thanks for the link. I'll keep reading, attempting to learn more.

[Andy_B]

He advised that if I want to play, take some extra cash flow I do have and throw it in a Roth IRA. He strongly suggested I avoid taking that money and buying individual stocks. All I know is that I don't consider myself that well versed in investing. And I do tend to get impatient. My fear is that I won't have enough for retirement when the time comes.

He is giving you some sound advice.

Your fear is a good one. However, don't let it consume you into "chasing" the home run. Use the fear to put in to practice a solid savings plan for yourself.

If you are new to investing, choose safer types of mutual funds (some value funds don't swing wildly year to year but can return you relatively steady rates over the years) to get started.

But concentrate on the savings part first, then as you go you will learn more about different investing choices.

Check out this thread if you haven't already. It was a nice discussion on how to go about saving.

http://www.bigsoccer.com/forum/showthread.php?t=177656

Andy

[Pathogen]

Thanks, Andy.

I believe I've got the savings down pat. We live below our means enough to invest 10% in my 401k, save for vacations, birthdays, Christmas, and a mariad of other expenses and still have some left over for investing whether it be home upgrades, securities, or my daughters' 529s. It's not easy to do given that I'm right on the median for my age group as far as income is concerned, and we do it only on one income. I don't have any debt other than one car payment (the other is paid for) and my home mortage. No student loans courtesy of the military (GI Bill) and work (reimbursemnts). Actually, according to March's (I think) issue of money magazine, I'm ahead of the curve when it comes to savings and investments for my age group.

Having said that, I read what many of you post as far as your ROIs are concerned and I'm not anywhere near those numbers. So I feel like I'm doing something wrong.

Am I being overly concerned when trying to compare my market successes to others? I read Kiplinger and Money and try to track the market by watching Bloomberg and CNBC (although they suck sometimes). I don't read the WSJ (don't want to pay for it).

Anyway, I appreciate any suggestions. I have thought that perhaps it would be best to take any extra money I do have and throw it into the girls' 529s and forgo chasing higher returns on the market. By all accounts, I'm doing good. I just think I can do better.

[Sachin]

Chasing a rate of return is kinda like trying to win a soccer game simply by measuring shots on goal. The real "winner" isn't the person with the highest rate of return, it's the person who has enough money to meet his or her goals.

You're better off with a slow, steady buildup over a long period of time.

Sachin

[Andy_B]

Having said that, I read what many of you post as far as your ROIs are concerned and I'm not anywhere near those numbers. So I feel like I'm doing something wrong.

You may have misread my post.

If were referring to this post

http://www.bigsoccer.com/forum/showpost.php?p=4605676&postcount=23

Read it again if you have some time. You will see that the number I listed is my total portfolio growth, not my ROI. The growth came as much from savings as it did from ROI.

Am I being overly concerned when trying to compare my market successes to others?

You should only be concerned with how YOU are doing.

This is what I do

1) I try and lay out reasonable life goals (how much I want to pay for college, when I want to retire, how much I will spend in retirement etc)

2) Then create simple spreadsheets pooling your money and see how much savings and return you need every year to achieve your goals

3) Then on Dec 31 each year I do one last update to show the difference between last years total portfolio and this years and determine how I am doing compared to my goals. If I am not meeting my goals, my choices would be to adjust my investment/savings strategy or adjust my goals.


My goals are different from yours and different from Sachin's etc. Thats why you should not worry about keeping up with the Joneses, only have to keep up with the Pathogens :)


Andy

[Sachin]

My goals are different from yours and different from Sachin's etc. Thats why you should not worry about keeping up with the Joneses, only have to keep up with the Pathogens :)


Print this out and read it every time you think about how much money someone else says they are making. It's not about us, it's about you and your family.

Also, if you are getting your rate of return by looking at a chart generated for you in Yahoo Finance, you're not getting the full picture. All you see is appreciation or depreciation. You don't see the overall growth generated by dividends.

Sachin

[Pathogen]

You may have misread my post.

You're correct. I'm sorry for my misunderstanding. In the sense of total portfolio growth last year, I'm doing quite well. Perspective makes all of the difference.

If were referring to this post

http://www.bigsoccer.com/forum/showpost.php?p=4605676&postcount=23

Read it again if you have some time. You will see that the number I listed is my total portfolio growth, not my ROI. The growth came as much from savings as it did from ROI.

As did mine. I wasn't really factoring in saving as a percentage of growth because it's liquidated and usually allocated if not already spent. (Note: not necessary spending, just fun stuff.)

You should only be concerned with how YOU are doing.

Easier said than done. But I know what you're saying and I continue to give myself the same advice. Sometimes it's hard to listen to reason. :)

This is what I do

1) I try and lay out reasonable life goals (how much I want to pay for college, when I want to retire, how much I will spend in retirement etc)

This is going to sound dumb, but I haven't actually done any really planning. I know this is bad on my part and something that I will rectifiy ASAP.

2) Then create simple spreadsheets pooling your money and see how much savings and return you need every year to achieve your goals

Again, not something I've done. Noted, however.

3) Then on Dec 31 each year I do one last update to show the difference between last years total portfolio and this years and determine how I am doing compared to my goals. If I am not meeting my goals, my choices would be to adjust my investment/savings strategy or adjust my goals.

There's a joke here about how you spend New Years Eve. ;)

My goals are different from yours and different from Sachin's etc. Thats why you should not worry about keeping up with the Joneses, only have to keep up with the Pathogens :)


Andy

Keeping up with the Joneses is impossible. But on balance, I'm ahead of the Joneses. I guess the real question is is Pathogen doing the very best he can do for himself and his family relative to his economic situation? (look out! speaking in third person.) And I'm the only one that can really answer given that there are probably a hundred different ways to asnwer it; and all of them could be right in their own way.

I really appreciate your and Sachin's input.

[Pathogen]

Print this out and read it every time you think about how much money someone else says they are making. It's not about us, it's about you and your family.

Also, if you are getting your rate of return by looking at a chart generated for you in Yahoo Finance, you're not getting the full picture. All you see is appreciation or depreciation. You don't see the overall growth generated by dividends.

Sachin
Again, noted. I think I'm suffering from a lack of perspective. But you never know until ask people "in the know".

[Andy_B]

As did mine. I wasn't really factoring in saving as a percentage of growth because it's liquidated and usually allocated if not already spent. (Note: not necessary spending, just fun stuff.)

But thats really not savings then. I would categorize it more like expenses.

When I talk about savings, I mean the following

(money invested in 401k) + (money invested in IRA) + (money invested in 529) + (money invested in brokerage accounts) + (cash left over AFTER all years expenses have been paid, including the fun stuff)

This is going to sound dumb, but I haven't actually done any really planning. I know this is bad on my part and something that I will rectifiy ASAP.

Absolutely not dumb. From experience I can tell you the simple fact that you are on a board like this reading and asking questions puts well ahead of the normal American in terms of personal finance.

You are asking all the right questions and voicing all the correct concerns, now you just need to take the next step and address some of them.

One other piece of advice, before you plan for your future, make sure you understand your present.

What I mean by that is make sure you know how you spend your money (and I am not talking about having 40% in the misc category in Quicken), I mean get a real feel for your monthly budget of what you spend and where you spend it.

IMO it is difficult to plan for the future if you are not 100% confident of your financial present.

There's a joke here about how you spend New Years Eve.

It is not joke. I have no life. If I stay up later than my 5 year old on New Years Eve I am doing well :)

Please feel free to keep asking questions. if you would rather email or pm, also feel free.

Andy

[SgtSchultz]

Excellent thread.

I remember during the dot.com boom how many people were bragging about how much money they were making. In all the excitement, I felt my conservative approach was a waste of time. Looking back on it now, I did just fine. There is not one investor who feels they could have done better. The most important thing is to stay focused on your goals. Real wealth does not happen overnight. On a few occasions, there are those folks who have basically won the lottery. The rest of us have to create wealth the old fashioned way. That means spending less and saving more. It is not sexy and definitely does not make the headlines. However, I sleep pretty well most nights.

[Sachin]

I remember reading an article that most lottery winners have spent their entire winnings within 5 years of hitting the jackpot.

Sachin

[Levante]

I remember reading an article that most lottery winners have spent their entire winnings within 5 years of hitting the jackpot.

Sachin


One of my coworkers plays the lottery daily. I told him the same thing.......he replied with what most people say in this regard....


"Not me.........."

ok.

[DoctorJones24]

Consequently, I've been making changes to my 401k attempting to catch market trends.

I was just thinking of doing this today. It looks like the market will continue to tank it for a bit--is it worth it to move my 401k into bonds temporarily to avoid further plummeting?

[Andy_B]

I was just thinking of doing this today. It looks like the market will continue to tank it for a bit--is it worth it to move my 401k into bonds temporarily to avoid further plummeting?

Most people would recommend to not market time (ie try and guess when the market is going to go up or down).

You should cover yourself by simply dollar cost averaging. If you dollar cost average, you can take advantage of down markets by buying at a lower cost.

Andy

[Pathogen]

Most people would recommend to not market time (ie try and guess when the market is going to go up or down).

You should cover yourself by simply dollar cost averaging. If you dollar cost average, you can take advantage of down markets by buying at a lower cost.

Andy
That's what my father-in-law beat into my head the other night. I felt kind of dumb by the time he was finished. "Do you ever buy something on sale?" was his exact remark. Since you put it that way Dale, yes I do. It did occur to me that chasing the market could be bad. And everything I've read cautions you NOT to do it. And truth be told, I'm not savvy enough, or experienced or knowledgeable enough to really win with this strategy. It's best for guys like me to diversy to the recommended percentages and be patient. I'm shelving any illusions of hitting it big on the market.