Becoming an Investor

David Gartland

MY DREAM WAS TO become a brilliant investor who knew when and what to buy and sell. I imagined myself doing the necessary research, which would allow me to make savvy decisions, which would then impress my wife and relatives, as they observed my uncanny ability to always know what to do and when to do it.

This never happened.

Instead, I took stock of who I was and how I’d consistently behaved. “Know thyself” was the advice of Ken Pangburn, CEO of a company I once worked for. That’s what I endeavored to do. What I realized: I’m a saver, someone who has no difficulty skipping a purchase and instead putting the money in the bank.

Now, this is a good start. But it’ll never get you onto the Forbes 400 list of America’s wealthiest. I needed to step on the accelerator a little.

I undertook an in-depth study of investing. I had a good grasp of savings accounts and certificates of deposit. What I needed to learn was the other stuff. Stocks were the biggest mystery. I understood that owning shares meant you’re an owner of the company. But which stocks should I buy?

This led to studying fundamental vs. technical analysis, and thinking about whether to be a value or growth investor. Should I own individual stocks or mutual funds? If I buy mutual funds, should they be actively or passively managed? It was all very confusing.

I felt I had a better handle on bonds because I’d owned some savings bonds. Still, the same questions I had about stocks also applied to bonds. Do I buy individual bonds or mutual funds? Should I buy government or corporate bonds? Still very confusing.

This confusion took me back to who I fundamentally was. I was a saver. Period. Full stop.

How does a saver become an investor? I was first introduced to Vanguard Group through my company’s 401(k) plan. Vanguard has a one-stop-shopping option in the Wellington Fund, a balanced fund. Such funds typically have roughly 60% in stocks and 40% in bonds, so 60-40 became my default asset allocation, which I have continued to use to this day. Simple.

The next question was tax-deferred or taxable-account investing. Both had their merits, so I did both. After watching Suze Orman’s show one night, I learned I could fund a Roth IRA, even though I was contributing to my company’s 401(k). I continued doing so until I stopped working. I didn’t, however, choose to convert any IRA dollars to Roth dollars. That would have reduced my future required minimum distributions, but I didn’t want to pay the taxes until I had to.

Another question that I needed to answer: active or passive? One of the tenets of investing is diversification. Why not diversify by management style? So, I did both. This diversification approach continued with the size of companies owned by my stock funds and the country of my investments.

The next strategy I adopted was dollar-cost averaging, since it struck me as similar to putting money into a Christmas club savings account. As long as I didn’t put too much money into any one investment vehicle, I could sleep at night.

The final decision I needed to make: Do I rebalance back to my 60-40 mix? I decided to do it once a year. I do this in my IRA, not my regular taxable account. In my taxable account, I simply put more dollars into whichever asset class is underweighted, trying to gently nudge the account back into line. Meanwhile, I don’t need to rebalance in my Roth, because in that account I own a balanced fund that does the job for me.

David Gartland was born and raised on Long Island, New York, and has lived in central New Jersey since 1987. He earned a bachelor’s degree in math from the State University of New York at Cortland and holds various professional insurance designations. Dave’s property and casualty insurance career with different companies lasted 42 years. He’s been married 36 years, and has a son with special needs. Dave has identified three areas of interest that he focuses on to enjoy retirement: exploring, learning and accomplishing. Pursuing any one of these leads to contentment. Check out Dave’s earlier articles.

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