Two Words

Dennis Friedman

I’VE LATELY BEEN having a hard time sleeping—and I have a pretty good idea why. It has to do with two words that keep bouncing around inside my head. If you let them, those two words will also keep you up at night. They’re powerful because there’s no end to them. You ask, “What are the two terrible words?” The answer: what if.

What ifs are about what could happen in the future and, if you let your imagination run wild, it’s usually something bad. I’ve been thinking a lot about my future. I don’t know if it has to do with turning age 70. I don’t think so. I actually feel pretty optimistic about the next decade. I’m looking forward to spending some quality time with my wife once this pandemic is under control.

Still, I’ve been thinking a lot about my wife’s future, too. What happens to her if I’m no longer around? Will she have trouble supporting herself financially? Questions like these keep popping up in my head. They shouldn’t, because I believe we have these kinds of things under control.

The trust we set up and our well-funded investment portfolio should help her weather any unforeseen financial challenges that come her way. Also, all our important documents and contacts are stored in a centralized location, so they’re easily accessible. If she needs professional advice, we have a relationship with a low-cost financial advisor, tax accountant, attorney and insurance agent.

When pondering what ifs, there always seems to be another one. The other day, I started thinking about household emergencies. What if the hot water tank leaks? What if the electric garage door won’t close? How do I prepare my wife for those kinds of hassles?

I realize the real problem resides with me. My wife is a fiercely independent and intelligent woman. She can handle these types of everyday headaches herself. She doesn’t need me to try to prepare for every problem that might occur in her life.

Trouble is, I want certainty, but life doesn’t offer much. If you’re like me, and sometimes you’re unsure and hesitant, especially when it comes to managing your portfolio, here are nine money tips:

1. What if international stocks outperform U.S. stocks? What if small-caps outperform large-caps? What if interest rates go up? This sort of endless uncertainty can paralyze investors.

What to do? Since you don’t know with certainty how each asset class will perform each year, you should own them all. By having a diversified portfolio with total U.S. stock, total international stock and total bond market index funds, you’ll sleep better at night knowing you’ve addressed many of the what ifs in investing.

2. Another way to deal with the uncertainty of investing is to use dollar-cost averaging. If you have a lump sum to invest and you’re uncertain about the direction of the market, divide up the money into smaller amounts and invest it over six months or a year.

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3. Don’t use an all-or-nothing approach to selling. If you can’t make up your mind whether to unload an investment or hang on, sell part of it. That way, you’re assured of being at least half-right.

4. Consolidate your financial accounts and limit the number of investments you own. Fewer holdings mean fewer decisions. A good example: target-date retirement funds. Buy just one of those, and you’ll have a professionally managed and hassle-free portfolio.

5. If you’re uncertain about your employer’s financial stability, invest no more than 5% of your money in the company’s stock. That way, even if the company gets in trouble and you lose your job, your portfolio won’t take too big a hit.

6. If you’re uncertain about whether you can meet your financial goals, buy yourself a sanity check—by hiring a fee-only financial advisor.

7. Cash can do wonders in eliminating uncertainty, especially if you’re worried about financial emergencies. Try to keep at least six months of living expenses in cash investments.

8. Tune out cable financial networks, such as CNBC and Fox Business. The talking heads with their market opinions can make anyone second-guess his or her investments.

9. A little knowledge can go a long way in eliminating doubt. The more you know, the more you know what to do. There are many excellent books about investing. Read a few, and they should provide you with the necessary knowledge to manage your own 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. Check out his earlier articles and follow him on Twitter @DMFrie.

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Hal Reed
Hal Reed
1 year ago

Dennis suggests reading some informative books about investing. I can recommend HumbleDollar’s Jonathan Clements’ HOW TO THINK ABOUT MONEY. Although published several years ago, his thoughts and ideas are still applicable today. Lots of information about creating effective portfolios from low-cost index mutual finds and ETFs, and emphasizing appropriate asset allocation.. I have been reading Jonathan since he first started writing for the Wall Street Journal in the 1980’s and have incorporated many of his ideas and recommendations into my own investing. These have worked out quite well for me and my family, as I am now a few years into retirement and my financial prospects are looking good. I sleep pretty comfortably at night.

Steve O
Steve O
1 year ago

American home shield for house repairs.
Have your wife take over the finances now.
This year switch husband wife roles to gain experience and confidence.

Last edited 1 year ago by Steve O
1 year ago

Life is full of risk. If you’re 80 years old, living in Europe , and WWII starts, you’re in big trouble.
The US has been the safest country over the past 100 years, but bad things that might impact you can still happen. Climate change wipes out Florida? China invades Taiwan? You can’t protect again everything.

1 year ago
Reply to  Ormode

So true Ormode, forget which Clint Eastwood movie it was but his comment “if you want a guarantee buy a toaster” has stuck with me for a long time.

My in-laws live a sleepy high end town in CT and they worry things are getting bad to which I reply life has never been safer overall for people like you since the dawn of man.

Even the 80 year old in europe yah, crappy way to end things but they might have had a great run.

Peter Blanchette
Peter Blanchette
1 year ago

Think about all the senior folks out there who are a LOT worse off than you are. If you have life insurance and long term care insurance you have done everything anyone can possible do. Life is about feeling that you have done everything you could and accepting that is the way it is.

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