Sunday, January 04, 2015

Just Leave It the F*ck Alone

Your 401(k) thought for the day: When we shifted from Mass Mutual to Vanguard last summer, most everybody's money got moved into Vanguard Retirement Funds, which provide wide diversification over different classes of assets.

But the trick isn't dumping your money into balanced portfolio, it's not screwing around with it after the dough lands there.

Legendary investor Warren Buffett is known for advising others to hold a conservative portfolio.

"My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund," he wrote to shareholders of his company Berkshire Hathaway earlier this year.

New data from investment adviser SigFig leads to a similar conclusion.

After analyzing portfolios held by 325,000 users, the robo-adviser found something interesting: The most successful investors in the group were also the least active. ...

But it's not just the SigFig research. There is also this from Financial Advisor Mike O'Shaughnessy:

"Fidelity had done a study as to which accounts had done the best at Fidelity. And what they found was ... they were the accounts of people who forgot they had an account at Fidelity."

So I guess the best advice we could give you: Put your money in a balanced, low-cost mutual fund, then blank out on having it there for twenty or thirty years.


Celshader said...

Human emotion will attempt to trip up most investors.

Early last year, a friend with a 60/40 balanced (and indexed) portfolio saw the generous returns of stocks, and wondered if he should increase his stock allocation. I advised him to do nothing.

Later that year, stocks took a modest dip, and that same friend wondered if he should reduce his stock allocation. I advised him to do nothing.

One could make a career out of telling anxious investors to do nothing. ;^)

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