FREE NEWSLETTER
I enjoy tasting new beers, and today there are some very good ones on the shelves. Still, it hasn’t always been this way. Some time in the nascent days of the micro-brewery craze, I recall my boss, the owner of the beer distributor, commenting that it was as if the tiny brewers were having a contest to see who could make the lousiest tasting beer.
I think that there’s an analogy that can be made between the abundance of micro-breweries and myriad financial products in that not all of them leave a good taste in my mouth.
Variable life insurance and variable annuities, real estate investment trusts, oil well partnerships to name a few that have been around for a while. Now we have things like crypto money, private equity, leveraged funds, and a slew of niche exchange traded funds that track all sorts of weird things. And don’t forget the endless array of things a prospective advisor might utter in order to snag your money.
In a recent post, Bill W wrote that he poured all his contributions into the S&P500 for 40 years. Simple. Wow. I commented that we should coin a new phrase, Keep It Boring Stupid, KIBS. (I’m not advocating for everyone to go all in on a single index, rather, I am just illustrating my point).
When it comes to investing, boring is good, and few, if any, HumbleDollar readers would buy into the promises that many investments expound. But today’s workers are our children and grand-children, they have their own savings, and soon, many will have some of ours as well. I wouldn’t want them to bite on the hype.
I’m not suggesting we preach financial fire and brimstone to the kiddies, perhaps just set a good example and maybe share a story or two about our life experiences. Maybe we can convince them that “there ain’t no such thing as easy money”. Rickie Lee Jones – Easy Money (w/ Lyrics)
As a retired fee only advisor, I agree that keeping it simple is normally the best investment philosophy. However, there are a few issues where do-it-yourself investors often stray while striving for simplicity:
Investors would be prudent to know a little about these fundamental principles and how they apply to their individual situations before trying to keep it (too) simple.
Robert, thanks for this. Many of us DIY investors don’t know what we don’t know. I believe that the majority of the population requires the help of an fee based advisor such as yourself.
Sadly, I was once in the business, employed by a firm that was owned by a huge insurance company. they were all about selling several of the products I mentioned in my article.
Consumers lacking financial acumen can’t distinguish the good guys from the bad.
And of course, I would never advise anyone to go all in on the S&P, or any other single index.
Great post about keeping it simple (or boring) Dan. Thanks.I’ve been retired five years now and my wife and I are financially secure. In my 20s when I had more disposable income than I needed I dabbled in options trading. After about 2 years I had enriched a broker by about 2K and had nothing to show for it. After exploring IPOs and penny stocks in my early 30s I had a similar outcome. Finally in my mid 30s I began to seriously contribute to my employer’s retirement plan until I retired at 70. My financial journey also included several whole life policies that I cashed out a few years from retirement to pay off a large mortgage. My foray into whole life insurance was at the advice of my father’s financial advisor who for a time managed our retirement and brokerage accounts. After reconnecting with an old HS friend (an estate planner at a small savings and loan) I began reading HD. Since retiring I’ve managed all of our finances. All of our funds except our checking account and two high interest savings accounts are with Fidelity. Every year Fidelity checks in with me for a free consultation. Our funds are diversified in low cost mutual funds and ETFs. Our portfolio is 75% equities (US and int’l) and 25% bond funds. For the past few years I’ve been required to take required minimum distributions. So far, I’ve taken most of the distributions from stock funds; if the market turns down I’ll take the RMDs primarily from the bond funds.
In hindsight, to paraphrase a classic rock song (Mellencamp?) I wish I knew then what I know now. Thanks for your post Dan. I’ve learned so much from HD contributors.
I have had my share of misadventures as well. Thanks for such an honest and personal post.