My Lazy Investing

Catherine Horiuchi

MY FIRST JOB AFTER college was at a global engineering firm. A roommate also worked there. It was a tedious office job, but my bosses thought I had potential and encouraged me to study engineering, which I didn’t.

Instead, I quit and went to graduate school to study linguistics, a field where I observed the most professors having the most fun. My last paycheck at the engineering firm included an extra sum. It was a refund for a retirement account that had failed to vest because I hadn’t stayed long enough. This shocked me, since I hadn’t the foggiest sense that someday I would be old and need retirement funds. I didn’t know there was such a thing as a defined benefit plan. I spent the windfall, probably on rent and books, with nary a second thought.

At my second job, I paid attention when bosses talked about the company’s 401(k) plan and insurance coverage. I worked there five years and, when I left, that money stayed in place. A lazy investor, I let it ride until I later rolled it over into my retirement account at my next employer.

Throughout the remainder of my working life, I never cashed out that money. In fact, thereafter, I let all saved dollars ride, remembering that first little retirement check that got away.

Some friends worked on picking better investments in an effort to boost their performance, but that sounded like extra effort with limited return for time invested. I just saved a little more, assuming my results were a little weaker. I’d ask others only general questions and tried to stay away from the worst investment mistakes, even when banner headlines managed to pierce my general disinterest in personal finance.

During the dot-com boom, I met a couple of guys at a conference mixer who were discussing their hot investments, including the grocery service Webvan. I asked why they owned the stock, given Webvan’s apparently flawed business model. “What do I care?” said one. “I’m selling that stock tomorrow.” That day, I gave up owning anything other than mutual funds. I figured it would take a lot of time to be knowledgeable enough about individual stocks, and I was too busy with family and career.

Instead, I followed a “random walker” dollar-cost-averaging investment model, saving what I could of each paycheck and periodically noting whether my retirement accounts were growing. I didn’t switch in and out of funds based on returns, and I didn’t accelerate my contributions when markets were weak, strategies that might have boosted earnings, if I were correct and lucky, or might have cost a lot.

Some years, I felt like I was pouring water into a draining tub, buying into a falling market. But I was no expert. I never spent enough time studying finance, so I had no idea how to avoid such bear market losses, if that’s even possible. I couldn’t outsmart expert investors and industry insiders. So I continued on my lazy path.

As I grew older, the cost of retirement became clearer. Once I hit age 50, I took advantage of catch-up contributions. This was a choice made out of fear, not savvy, and also a lazy way to “spend” my salary increases, since my living expenses were pretty steady at that point.

Whenever a market correction occurred, I would open my retirement plan statements with trepidation. Even with ongoing contributions, my total balance sometimes declined. I’d look happily at the portion of my portfolio in bond funds that retained the value of recent contributions. In other years, and over time, I noticed how little my bond funds grew. The bulk of my money, held in diversified stock index funds, had done much better. This encouraged me to keep contributing to a balanced portfolio that had slightly more in stocks than my risk-averse nature might prefer.

I have time now to reflect on the outcome of four decades of work and investing. I’m no market expert and there was nothing remarkable about the funds I selected. But over time, I built a secure foundation for retirement. Looking back, three things strike me:

  • Investment returns appear small year to year. Stepping back and looking at longer-term results encourages you to let your money ride.
  • Bond fund returns look great during a down market. But that’s a partial story. If you look at returns for the whole of your investments over several years, you might be inspired to contribute a bit more to a total stock market index fund. This perspective may be especially valuable for working women, who in the aggregate earn less, have less to put aside and tend to be more risk averse.
  • As you go through life, retain or roll over retirement accounts, rather than spend them along the way. Multiple small retirement accounts will eventually build into something significant, just as rivulets flow together into mighty rivers.

Catherine Horiuchi recently retired from the University of San Francisco’s School of Management, where she was an associate professor teaching graduate courses in public policy, public finance and government technology. Check out Catherine’s earlier articles.

Do you enjoy HumbleDollar? Please support our work with a donation. Want to receive daily email alerts about new articles? Click here. How about getting our twice-weekly newsletter? Sign up now.

Browse Articles

Notify of
Oldest Most Voted
Inline Feedbacks
View all comments

Free Newsletter