Simplicity = Victory

(I'm talking about investing for retirement here. You know, that thing most people should start doing in their twenties? And don't?)

Barry Ritholtz, an investment guru who runs one of the most entertaining and savviest financial blogs around, lays it out:

1 Go passive. Here is a dirty little secret: Stock-picking is wildly overrated.

2 Diversify across asset classes. Owning a variety of asset classes means that some part of your portfolio will be doing well when the cyclical turmoil arises.

3 Be mindful of valuation. When making purchases, valuation matters more than anything else. What you pay for an investment is the single biggest determinant for how successful that investment will be.

4 Dollar cost averaging. This means automatically putting the same amount of money each month or quarter into several broad indices.

5 Keep costs and expenses low. Overhead is a big drag on returns.

6 Rebalance your portfolio. After a good run in any asset class, your model will have drifted from the original allocation.

7 Avoid the noise. Our goal is to block out the things that send you down the path of pointless complexity. A good start includes dramatically paring down your consumption of online, print and TV financial news.

8 Review your portfolio regularly. At least once a quarter. Check your allocations, see what is working, what is lagging.

9 Steer clear of venture capital and private equity.

10 Avoid new financial products at all costs. ...

When I was a lad (i.e., twenty-five years old) I inherited my father's "financial advisor" ... who was charging 2% off the top.

Idiot that I was, I thought this was a splendid deal. My thinking was, "Hey. I'm keeping 98% of the investments he puts me in. ..."

Wrong.

2% off the top means 2% per year. Multiplied by the 19 years that I spent with this gent, that's 38% going into his pocket and not mine.

If you have a bit of discipline, patience and internal fortitude, you can follow Mr. Ritholtz's recommendations and spend about two-tenths of a percent on your investment portfolio. (This is 1.8% better than Yours Truly did with a a broker-advisor who delivered returns that were below the S & P 500 Index.

I know I harp on this a bunch, but I don't want people to be as stupid as I was for nineteen years.