The No Hassle Approach to Investing

My time is my most valuable form of currency. I choose to spend it doing whatever the hell I want with the people I want to share it with. One thing I don’t want to waste my time on is stressing over near term market movements, entry/exit points and charts! There are people who do this all day, every day and they are rewarded handsomely for it.

Me, on the other hand, I live. And when I have to, I work.

Now, I’m not at all qualified to give you investing advice. But I can tell you what I do with my money. I can also promise you that I’ve spent hundreds of hours researching this topic (and stressing over near term market movements, entry/exit points and charts) to develop a no hassle approach to investing that will provide maximal output. Let’s dive in.

Here’s what you should know before I unveil my Automated Money Machine:

• Warren Buffet said it best in his two rules of investing: “Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.”
•  96% of mutual fund managers under perform the S&P 500. Yup, 96%. These are money management professionals and they cannot beat the S&P 500 index. I’m a smart guy, I could work my ass off and maybe I could be in that 4%. Or I could follow the smart money, invest in index funds and take a winnable approach to an often unwinnable game. I know it will limit my upside, but I’m also protecting my downside (See Rule No. 1 or 2. Thank you, Mr. Buffet).
•  Asset Allocation. This is a critical part of my portfolio. Opinions from investment professionals differ across the board on this one. I’ll follow the advice of the famous hedge fund manager Ray Dalio who has only had four losing years out of the last 30 (His biggest loss was 3.93%). If you have a better idea, go for it.
• Management fees. The mutual funds or ETFs you buy matter! Buy index funds with low management fees. Here’s why: Let’s imagine you and a friend invest $100,000 in two different funds. Your fund has an annual fee of 2% and your friend’s fund has an annual fee of 1%. Assuming a 7% growth rate, after 30 years your investment would be worth $432,194. Your friend’s investment would be worth $574,349. I’m no expert, but I hope I’m your friend in this scenario. (P.S. The average cost for owning a mutual fund is 3.17% per year.)

The Automated Money Machine

I’m enrolled in a non-retirement account at Vanguard.com. I’m invested in four mutual funds (To the tune of 0.20% in annual fees, this is why the Vanguard is important):

• Vanguard 500 Index Fund (VFINX) – 30% of account
• Vanguard Long Term Treasury Fund (VUSTX) – 40% of account
• Vanguard Intermediate Term Treasury Fund (VFITX) – 15% of account
• Vanguard Precious Metals (VGPMX) – 15% of account

Deposits are scheduled monthly from my bank account and money is automatically invested according to this asset allocation. Go rebalance your account once a year and you’re done. It’s that simple.

Graph compares investment returns of $10,000 invested in 1997.

Portfolio 1 - Automated Money Machine

Portfolio 2 - S&P 500 Index

Portfolio 3 - Total Bond Market Index

But what about retirement?

The same principles apply. I max out my retirement contributions prior to adding funds to the non-retirement account. I don’t qualify for a Roth IRA (otherwise I would), so my money has to be invested in an SEP-IRA. I’ve chosen to manage this with Fidelity. The Fidelity mutual funds I invest in are: Spartan 500 Index (FUSVX), Spartan Long Term Treasury (FLBAX), Spartan Intermediate Term Treasury (FIBIX), Fidelity Select Gold (FSAGX), and Fidelity Global Commodity (FFGCX). The only difference from the prior allocation is that Gold and Commodity are each weighted 7.5%.

That’s it! Short. Plain. Simple.

But what do I know? The truth is, nothing. No one knows where markets will go next. But I do know I won't be wasting any of my most valuable currency worrying about it. I continue to work hard for my money and I'm determined to protect it and grow it in the easiest way possible.

While I can’t tell you what to do with your money, I can tell you what to do with your time. Spend it wisely.

- Mr. Go