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!
So, How Am I Lazy?
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.
My Advice
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?
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Many people say that the ‘buy and hold’ strategy is dead, but I think those people are looking for the quick buck and not in it for the long term. Trying to ‘stick with a vision’ seems to be a dated concept these days, but I believe it can work. The key is to keep an eye on things and I would make sure to have an exit strategy in the event that your holding is no longer aligned with your expectations.
Great call on figuring out when your holdings don’t work anymore – for me that’s rebalancing, but it could be different for others.
Glad to learn one of my foremost characteristics will improve my investing results! 🙂
I like to say that I’m a boring investor. And I am. Mostly index ETFs, although I have a few dividend aristocrats, you know, for fun and excitement.
Those Dividend Aristocrats…crazy stuff Miranda!
Gambling with your portfolio is not fun, gambling in Vegas is fun. If I’m going to gamble, I should at least get some free drinks in the process!
Great call Jim – you have to view the money you gamble as a total loss, so hopefully you get some value from it.
Great advice!
Most of my investments are in some kind of fund. Like you I have a handful of individual investments that I don’t use big money for. Even with those I like to have a good reason to invest in them and it’s not all gambling.
There are definite advantages to being lazy. Robert Heinlein has a great story about succeeding via the hard work of laziness.
That said, I would still be careful about diversification. If you want to be lazy in investing, make sure one way you aren’t lazy is by spreading your eggs into multiple baskets. Buffet says put them in one basket and watch that basket. But that’s not lazy. So if you’re going lazy, and not paying too close attention, make sure you spread your risk into investments outside the securities markets.
It’s the only time I will admit that I am lazy! Going for the long term success.
I have a theory about supposed laziness! My theory is that yo do not see the value of doing the particular goal or project and just need some persuasive argument why you should. For example, I don’t want to clean out the garage. Is it laziness or I don’t see the value in doing it? I still can get the cars in with out stuff blocking anything.
Finally, my laziness can pay off. I’m probably not as lazy as I should be when it comes to investing though.
Next time you can send him to me and I can show him results of my portfolio speculation. Or go to my blog and read a curious history of a sucker.
You will save him a lot of pain.
I like to be lazy, invest into dividend paying stocks and the do nothing (well, time to time glance over the stocks.).
I completely agree. Our plan is just like yours…boring, lazy, lifestyle fund investing for much of it, with a little investing fun money (5 dividend stocks) thrown in. And thanks to Abbot Labs, I now know what a stock spin-off is!
It’s a great company and a learning experience!
Yay for laziness paying off! I check in on my stocks every week or so, just to take a gander. Buying and holding has served me well thus far.