FREE NEWSLETTER
A mutual-fund company’s public relations representative once told me about what she dubbed the “conviction tour.” It was the late 1990s, and she and one of the firm’s star money managers toured the New York media talking about the importance of conviction when picking individual stocks. I guess they figured it was the sort of theme that would resonate with story-hungry financial reporters.
I like the idea of conviction. I think it can be hugely valuable to those with a prudent strategy. But I fear conviction could be the downfall of those who commit themselves to badly diversified portfolios or misguided financial strategies.
That raises the question: What should we commit to—financially speaking?
Promising ourselves that we’ll stick with broad market index funds seems sensible, provided our overall mix of funds is reasonably aligned with our goals. In other words, dividing your money between a total U.S. stock market fund and a total international stock fund seems like a fine strategy—unless you’re living off your portfolio, in which case you probably also ought to own some cash or bonds as well.
Similarly, I can’t find much fault with commitments to rebalance regularly, fully fund a 401(k), give 10% of income to charity or add extra-principal to each monthly mortgage payment.
So, what financial commitments have you made to yourself—and which past commitments do you regret?
I committed to “paying myself first” when I started my first job. The power of compounding just made sense to me. We saved as much as we could into 401k’s and our brokerage account, including automatic withdrawals that funded a diversified set of funds. We also paid our credit card bills off each month. This did not leave much leftover, but I told my wife that she would thank me some day…and that time is now. My regret is having the false confidence to choose my own individual stocks and actively managed funds to invest in. We did ok and I enjoyed the research, but as I look back, I realize that I could be further ahead if I just picked a few index funds and rebalanced periodically. I have been working to switch things over, but large capital gains have limited my flexibility.
I used to regret not returning to business ownership, not buying rental property, not leaning enough to buy more exotic investments. I now am thankful for the trade in more time and dodging the chance at losing big. I’m now committed to keeping a reserve of cash and bonds, while putting everything else in total market funds. I’m not seeking the thrill of complexity .
Covering at least half of college costs for nieces, nephews, and others close to us including grad school. We had to put ourselves through under our own steam aside from scholarships, and we both worked 40+/ week all the way through school.
Maxed out all workplace retirement plans, income deferrals, IRAs. It can be harder to retire early this way, but you shelter income from lawsuits (thankfully not but in medicine it happens).
Against advice we bought individual stocks mostly in tech and health care/pharma/devices, areas of our competency (except for my Chipotle early gamble, competency in burrito studies). It worked out, this will be legacy money to reprice at our deaths. Retirement money in bonds and indexes.
Big regret in ever buying houses, cars and all the junk that goes in them. We are hopeless losers at real estate investment for personal or rental reasons. Here’s to late discovery at the enjoyment of minimal space in a secured building in a great location with public transportation.
I regret not having a couple of golden retrievers through the journey, and my husband regrets not having a couple of chatty Siamese cats, but with each of us allergic to the other’s pet of choice, we have saved lots on vacuums!
As I’ve written previously, I’m committed to never participating in a real estate partnership ever again. I will never own another timeshare. I will never carry a credit card balance. I will only pay cash for automobiles and relatively big purchases (furniture, appliances). I am committed to having approximately 90% of my money invested in stock & bond index funds. I am committed to not letting everyday emotion upset my long term investment strategy.