AS A REGULAR READER of HumbleDollar, The Wall Street Journal and Bloomberg, I pick up all kinds of pointers on investing. And the more I read, the more I think I may have been doing it wrong all these years. My approach to picking investments is more aligned with a dartboard than a spreadsheet.
I’ve never owned an exchange-traded fund. I don’t know what the VIX is, except it measures expectations. That’s a neat trick. And don’t get me started on the inverted yield curve. That sounds like a yoga position.
Take the trading week that began on Monday, Jan. 9. The S&P 500 gained 2.7% and the Dow Jones Industrial Average rose 2%. My portfolio’s increase didn’t match either percentage, but 34% of my money is invested in bonds. I did have a net gain of $38,848 for the week. That seems like a good thing.
I’ve given up trying to figure out what drives the financial markets. That week, inflation slowed, the Fed considered a quarter-point interest rate increase, U.S. consumer sentiment jumped—and more secret documents were brought home for lunchtime reading.
Since I retired, I’ve taken eight required minimum distributions (RMDs). Between December 2009 and January 2023, two things happened to my rollover IRA. It was reduced by withdrawals and increased by the performance of my investments. When all is said and done, my current IRA balance after RMDs is 27% larger than it was on Dec. 31, 2009.
Given that RMDs at my age are generally about 4% a year, the 4% rule seems to be working for me after 13 years, even during the recent market gyrations. True, I don’t add an inflation adjustment to my withdrawals, but inflation was only a significant factor for a couple of those 13 years.
I’ve heard something about mutual fund expense ratios. Frankly, I never looked at them until now. The expense ratios of the seven funds I own are 1.01%, 0.98%, 0.91%, 0.83%, 0.08%, 0.04% and 0.025%. I guess I did half good.
I own a balanced portfolio, with stocks in the majority. Of the total stock investments in my brokerage account, 20% is in one utility stock and 15% of the bonds are municipal funds.
This means I’ve broken at least one rule: too many eggs in one stock basket. But the 20% in one stock is explained by an emotional attachment. It’s the company where I worked for nearly 50 years. Most of my shares were earned as compensation.
My total portfolio looks like this: 54% index mutual funds and other U.S. stock investments, 5% foreign stock funds, 34% bonds and 6% cash equivalents. I haven’t made any changes to my asset allocation in years and I haven’t rebalanced since I retired. It would appear I am a seat-of-the-pants investor.
Yet, when I use the evaluation tools in my Fidelity Investments account, I’m told that, “The ‘style’ of your stock holdings in these accounts looks like it’s pretty similar to that of a benchmark that follows the U.S. stock market.” Similarly, I’m told that, “The ‘style’ of your bond holdings in your selected accounts looks like it’s pretty similar to that of a benchmark that follows the U.S. investment grade bond market.”
How did I manage that? There’s a lesson here: The most important investment strategy for most of us average folk is, “Just do it.”
Start early, stick with the basics, think long term, stay the course, slow and steady wins the race, and all that. Oh yes, the compounding of dividends, interest and capital gains payments is also pretty cool. I’m still reinvesting all forms of distributions in my brokerage account. Should I need to change that, I could receive at least a 15% boost in income.
