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In an Oct. 27 Morningstar article “The Case for a ‘Good Enough’ Portfolio,” Christine Benz asks the question, “Are you an optimizer or a satisficer?” [satisfice = satisfy+suffice] Do you continually search for ways to improve your portfolio, or are you happy with good enough? Reasons exist for each; no criticism implied for either.
I’ve been a happy satisficer for decades. I’ve made a few tweaks, mostly to adjust to changing life circumstances.
What about you? And what has led you to it?
I don’t want to be greedy or obsessed, but I am very glad I am not still making all the mistakes I have in the past. I think I am more drawn to continual learning than satisfiction. What will I learn today?
My saying is if your learning one thing every day it means your still alive.
Great question and I love the responses. I’m very content. The fact that there are so many different types out there tells me you’re all doing well. Hindsight is 20/20 of course but as it has been said before “How much is enough?” Some will never be satisfied and will always want just a bit more. I’m content to enjoy the returns we’ve been getting and the fact that I don’t worry or fret or have to keep “tweaking” our portfolio. Keeping an eye on things of course; and stayingdiversified is important. But enjoy the money you’ve all worked so hard for and have been diligently looking after. Remember life is short.
Great Question. Over the years I went from Optimizer or Satisficer, or from 40 individual stocks to 10, and 80% are indexes concentrating on the S&P 500. At 80 years old, happy to have most my fun watching how investing and Financial companies continue to market items not really needed. Remember it is less than 10% of the Finance Specialists beat the S&P 500!! Enough said.
Some financial moves are fundamental and hugely important. IMHO, once you have selected a place or places to hold your money, set your goals, accepted your level of risk, chosen your desired allocation, and chosen the investments you trust to deliver value for you, only periodic maintenance is needed. You can really do all that yourself.
I have found that most financial reporting in magazines and newspapers deals mostly with counting angels on the head of a pin – the issues being written about are going to have minimal impact on your portfolio, if any. You can take more than the RMD minimum without the sky falling, for example, and there are lots or reasons why one might take Social Security before reaching the maximum payout age. But financial advisors exist to “advise”, and so they will seize upon even the smallest of small changes to prove to investors why their advice is valuable. An educated and curious investor with a head on his or her shoulders can usually do a pretty good job of ferreting out what is important to them and acting on it if necessary.
I have to agree with bbbobbins, we’ll only know the effect of our tweaks in hindsight. I have made a few adjustments in my stock/bond ratio, but it’s been based on my own need for money protected from a market drop.
I posted this comment a few minutes ago at the “I don’t Know. Or Care….” discussion:
I like that you referred to a “globally diversified” portfolio. With 10 companies comprising about 38.7% of the portfolio, I don’t think the S&P 500 is sufficiently diversified. I do pay attention closer to our stock allocations.
Christine Benz at Morningstar put up an article “The Case for a ‘Good Enough’ Portfolio – Figuring out where you land on the maximizer/satisficer continuum could save you some time and money”.
These two groups are defined this way: The first is portfolio maximizers, or optimizers. The second group ‘doesn’t want to spend a lot of time on those smaller-bore issues. They’re more of what psychologists call “satisficers,” a term coined by economist Herbert Simon to be a hybrid of “satisfy” and “suffice.” When making choices, satisficers are looking for an option that’s acceptable rather than the best possible one. “‘
The article is free.
I was once one of the first group. But after 25+ years I’ve put my and the spouse’s portfolios largely on autopilot and closer in approach to group 2. I’m not a pure indexer, either. For one thing I don’t like the concentration in the S&P 500. Our portfolios are well distributed with small-, mid- and large-caps. Foreign stocks are about 25% of our stock portfolio and we are carrying a defensive amount in cash.
Berkshire Hathaway which is in the top ten by precent in the S&P 500 recently was given a stock downgrade. “The times they are a-changing”.
I resist tinkering by setting a threshold I allow my asset allocation to drift with the risk portfolio.
Been investing for about 60 years (now 80 y.o.) and have never rebalanced. According to Quicken, current allocation is:
Large Cap Stocks – 47%
Small Cap Stocks – 14%
International Stocks – 6%
Total Stocks = 67%
Domestic Bonds – 15%
Cash – 18%
Yes, I know it’s wrong at my age and there have been some gut wrenching dips, but it has served me well. Cash position is enough for 5 years worth of basic living expenses.
My only regret is not getting into low cost mutual funds earlier.
It can’t get simpler than that!
Yes it can. 80% S&P 500, 20% Cash. If I did this for the last 60 years, I am 80, I would have beat my current portfolio! My average is about 9.3% per year over 60 years, not bad S&P 500 average 10.4% per year. Only 20% of Wall Street companies beat the 10.4%. So overall, I am a happy camper.
For years/decades I’ve felt my portfolio was exactly where I wanted it to be…. Until it wasn’t. Now I consider tweaking it once a year, and I usually do
Ms. Benz’s article is worth reading in it entirety.
A Satisificer – her word choice – embodies the approach of not letting the perfect be the enemy of the good or, perhaps, the good enough.
We have an allocation of 50/43/7 and make minimal changes to the allocation or the portfolio. But the portfolio is an imperfect and not optimized collection: yes, lots of low expense index funds, but also a few actively managed funds, as well as some individual stocks and some individual bonds. Not optimized, but good enough to satisfy us.
I think anyone following some form of asset allocation, e.g.,60/40, 70/30, etc. is a Satisficer. It’s my guess that an Optimizer might not stick around on HD for very long.
It goes beyond asset allocation. Even someone with a 60/40 portfolio of low cost index funds might still spend a lot of timing optimizing Roth conversion, capital loss and gain harvesting, IRMAA avoidance, etc. Plenty of optimizers here on HD.
Investing is one area where setting it and forgetting about it(satisficing) is likely to outperform frequently adjusting your investments in an effort to beat the market.
Satisficer? Honestly, I’ve never used that word before. Although I surmised its meaning, I looked it up just to be sure.
It’s not that I don’t try to optimize my choices, I do spend or waste some time agonizing over certain decisions. However, once I make a choice I am able to move on without regret.
AI tells me that satisficers are less likely to experience regret after a decision because they are happy with their choice, which is seen as sufficient. I reckon that fits me better than the optimizer label.
Benign neglect. I once participated in one of those investor clubs. I found corporate reports excruciatingly boring. Index funds get me the market return without any work – what’s not to like?
I do miss those DRIPs, NAIC clubs, and browsing ValueLine in the public library!
A few minutes ago I was saying to my brother in law that our portfolio (45/45/10) has returned 8.5% per year over the past 10 years and for the past few months have been continuously hitting all time highs while living off the assets for six of those 10 years. Why wouldn’t I be satisfied with that?
I’m definitely in the good enough camp.
Me too. I was a relentless Optimizer for decades. It was exhausting. Now I just roll with it.
Mike, I wholeheartedly agree. I have spent my whole life, both professionally and personally, be a “good enough” guy. I was able to make decisions that were adequate and allowed things to move forward, whilst I watched colleagues get bogged down with trying to find the optimal solution. It was agonising to watch them squirm over this option / that option, whilst everyone waited for an answer.
Trying to be an optimiser in a world with so many choices would be just be eternally exhausting.
No one is a a complete optimizer – that only comes with being lucky in hindsight.
I think the path to contentment is obviously being a satisficer but that doesn’t mean a person’s “good enough” is set and forget for ever. As always new information might inform a periodic change in strategy.
As in so much personal finance the question of what is enough looms large.
Set it and mostly forget it.
Yup 100%
We have a “couch potato” portfolio.
Once a year, after 2nd quarter end (July?), we take money from whichever of our index funds has done the best and add it to the money from our CD that has just matured … and buy another one.
Whatever our time-weighted ROI might be is fine by us. We don’t chase yields or returns.
We’re satisfied that we should have some money left over to leave for our kids.
I am not a “couch potato” type person in terms of manage my portfolio but I did take advantage of the higher CD rates in the last few years and add them into my fixed income portfolio while doing annual Roth Conversion.
Real couch potatoes live short lives, financial couch potatoes live long lives. 🙂 As one of my colleagues at work used to say, “Less is more”. In the personal finance world that’s often true.