I had an interesting conversation with a reader of The College Investor a few weeks back and I wanted to highlight an important aspect of investing that may be missed: laziness. The dialogue started with the reader asking me if I thought it was okay to speculate with my portfolio. My answer: no! In fact, I really do the opposite: I'm pretty lazy. And that's a good thing.
The reader then highlighted this quote, which I thought was awesome:
There is something in people; you might even call it a little bit of a gambling instinct… I tell people investing should be dull. It shouldn’t be exciting. Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas. — Paul Samuelson, Ph.D., Nobel Laureate, “Ultimate Guide to Indexing,” 1999
He then followed it up with Jack Bogle‘s Ten Simple Rules for Investment Success:
- Remember reversion to the mean.
- Time is your friend, impulse is your enemy.
- Buy right and hold tight.
- Have realistic expectations: the bagel and the doughnut.
- Forget the needle, buy the haystack.
- Minimize the croupier's take.
- There's no escaping risk.
- Beware of fighting the last war.
- The hedgehog bests the fox.
- Stay the course!
I'm lazy in several key ways that are essential for investing success. First, I keep the majority of my portfolio in diversified index funds that are allocated appropriately for my investment goals and risk tolerance. I keep the index funds in a Roth IRA for me, a Roth IRA for my wife, and both of our 401(k)s. I also have a SEP IRA for the business, which is invested in index funds as well. I'm actually doing a solo 401k this year for the side business instead.
Looking back, I really haven't changed the funds I invest in over the last two to three years. I have trimmed several positions and added to others to reallocate my portfolio, but I typically do that once per year. I use a Google Doc to keep track of my asset allocation across multiple accounts.
For actually depositing money in, our 401(k)s are automatically invested, and I lump sum invest our Roth IRAs and the SEP IRA. I use this lump sum investment to do my asset allocation adjustments — having the extra cash in the account makes it much easier to get things adjusted appropriately without having to sell too much or tinker more that you have to.
Where Do I Gamble?
I do invest in individual stocks, and I currently hold eight individual stocks. Actually, I originally only owned five stocks, but have since enjoyed stock spin-offs that have created additional positions for me. I try not to let these positions take up more than 5% of my portfolio, but right now they are at about 10% due to gains in the early part of the year. I'll rebalance them next fall to get everything back in-line.
But, even here I'm pretty lazy. Every stock I own currently I've held for over a year. The longest position I have I've actually held for roughly 10 years, and the shortest is at about 1.5 years. The others are in the middle of that. If I do invest in an individual stock, it's for the long run — I'm not a trader.
So, hopefully you get the picture on why laziness is a great thing. I'm glad that my friend brought this up in our discussion, and I hope you get the picture. The bottom line is this: stay lazy, my friend.
How lazy are you when it comes to investing?