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I WORKED FOR MORE than 30 years in manufacturing, poring over data and paying attention to every detail that would impact production. As a project manager, I was responsible for making sure hardware was delivered on time, with no cost overruns or quality issues.
If we weren’t meeting deadlines or spending too much money, I was required to report these problems to upper management. They would ask me three questions: “What are you going to do about it? When will it get fixed? Oh, by the way, you aren’t going to make us late in delivering the hardware to our customer. You understand that?”
Working in that type of environment, you quickly learn to be proactive. You need to stay on top of things and try to prevent matters from going wrong. When they did, you’d better have a plan to fix it.
I thought, if I can manage millions of dollars of hardware going through the factory, I can surely manage my investment portfolio—so I used the same approach. When the stock market would turn down and my portfolio started to lose gobs of money, I would ask myself, “What I’m going to do about it? How am I going to fix it?”
My on-the-job training would then kick in and I would pore over financial data, trying to find the right investments to get my portfolio back on track. Over the years, I was in and out of more than 40 different mutual funds or exchange-traded funds (ETFs), 12 different fund families and countless individual stocks. I was a walking encyclopedia when it came to mutual funds, ETFs and stocks.
I created elaborate excel spreadsheets, replete with formulas, to give me detailed information about my investment portfolio. I updated these spreadsheets every day. If my portfolio wasn’t performing as I thought it should, I would make investment changes.
If I couldn’t find the right fix, I would just exit the market entirely. There would be months when I would be completely out of the market. I would then turn my attention to current events, looking for anything that would be an indicator to get back in.
When I look back, what did I learn that could be helpful to everyday investors?
Today, I’m retired. I no longer have to answer questions about manufacturing problems. I also no longer pore over truckloads of financial data. Instead, I turned my portfolio over to a financial advisor. I’m out of the investing business. My job now is to spend the money.
Dennis Friedman retired from Boeing Satellite Systems after a 30-year career in manufacturing. Born in Ohio, Dennis is a California transplant with a bachelor’s degree in history and an MBA. A self-described “humble investor,” he likes reading historical novels and about personal finance. His previous articles include Before You Leave, Lighten the Load and Better to Be Rich? Follow Dennis on Twitter @DMFrie.
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I really like this interesting article, Dennis. Glad it was put in the ‘Second Look’ section. I was unaware of Humble Dollar when it was first published.
FYI, the “Second Look” section is entirely automated. Articles that are at least 30 days past their publication date are randomly selected to appear every six hours.
Jonathan, I am happy I looked at this article yet again. You answered a question I’ve always wondered about but never asked.
Good advice. Given your knowledge of investing, I am curious about the role that your financial advisor plays.
You are going to save a lot of people a lot of heartache with this post. I can hear people now… “Only two funds?! It can’t be that simple!” Yeah, but in this sport simplicity is the ultimate sophistication (possibly Aristotle). I too had my years trying to beat the market only to find it a rigged boxing match. Rigged by efficiency. At least in boxing you find out rather quickly when you’re getting the stuffing beat out of you.
I have a question on the traditional mutual fund vs. the identical fund in the ETF format. It seems to me that the ETF would be more tax efficient in a taxable portfolio since it only generates dividend income. The traditional mutual fund will also have annual capital gains distributions to pay taxes on. Am I missing something?
ETFs can generate capital gains distributions — but it’s slightly less common than with an index mutual fund. Still, the difference in tax efficiency is modest and not something I worry about, at least when it comes to broadly diversified index funds.
Excellent post. I had an opportunity to convert my total stock market fund to an ETF with Vanguard and never saw the need to do so as a buy and hold investor.