Stay the course or mix it up.

Keeping it simple today because we had a crazy night yesterday (we had 20 high school freshmen over for an epic game night). Let’s jump right in to it shall we?

I’ve always believed investing should be kept simple. In fact, I probably keep things too simple. Since I am young, I have chosen to invest 100% of my retirement portfolio in stocks. The stock markets historical long-term performance is too good to deny. As a result, I’ve personally decided to invest in index funds. I invest in small, mid, and large mutual funds as well as an international funds (VTSMX, VGTSX, NAESX for those that care about the ticker symbol). I’ve contributed to the exact same funds since 2007, when I opened my Roth IRA.

This strategy keeps investing– something I’m not particularly interested in– easy. And for me, easy is crucial.

That said, I’ve been reading a ton about people investing in gold, commodities, and the like. Some people who were primarily all stocks, have jump shipped and are looking for alternative places to grow their money, while others are putting more money than ever before in the stock market because they believe it is on sale.

There is no right or wrong way to invest (this isn’t entirely true, but you get what I’m saying). Everyone has an opinion and I want to hear yours. I don’t want the comments to turn in to a pitch on why you think someone should or shouldn’t buy gold (that would be boring!). Instead, I just want to know “Has the recession caused you to change your investing strategy?” Have you become more conservative? More risky? Or are you like myself and haven’t changed a darn thing?

p.s. if you don’t invest your money in something, you are failing at life.

18 thoughts on “Stay the course or mix it up.

  1. Here in Romania we don’t have too many things to invest in. The Stock Exchange is still in its infancy and there have been many ‘scams’ which went by the name ‘investment’, so people are wary.

    I have started investing in something though: gold. Bullion, real gold coins, with no numismatic value. I buy it and keep it. No matter what happens, it’s real gold, it’s in my possession and I can sell it 30 years from now, should I need it.

    As you know your dollar has lots of ‘issues’, here in the euro zone we’re in a similar predicament, not to mention our currency which was never strong or stable. So I’d NOT keep money in the bank. My family already lost all their savings 20 years ago, when we had a HUGE inflation, I am not repeating their mistakes.

    No matter what happens with the currencies, gold stays the same. And it’s not just a number on the internet, it’s solid coins I keep for myself and my family.

  2. It is funny that throughout history we have seen times where gold has been a bad investment, but people act as if there is no way gold can depreciate. Gold most likely is in a bubble now, but things are so terrifying — it might also have more room to grow first. I personally don’t invest in gold because of the premium and fees of getting in and out (along with a delay) plus gold is taxed at an unfavorable tax since it is taxed as a collectible.

    I’ve been 100% in stocks from age 12 (now 25) — and that remains virtually unchanged.

  3. 100% stocks, I hate looking at my return on investment at this moment, but there is nothing in my accound that I will touch within 10 yrs. Trying to remember that I’m getting a huge discound on my current contributions. I’m not making any changes anytime soon.

  4. I use the age-in-bonds rule of thumb from John Bogle. 27% bond index funds (50% Nominal, 50% TIPS), 73% stock index funds (45% US, 50% Intl, 5% REIT)

    It isn’t very simple, though, because I have to optimize the portfolio over 4 accounts (his/hers Roth IRA, his/hers 401k). I have a spreadsheet to do the linear optimization on my portfolio.

  5. I missed the gold boat – having been born in the 80s, I was raised with the mentality that gold is never a good idea. Now I learned – it’s a hedge against recession. But if I had gotten in, I would get out now due to that bubble. I’ve been investing slightly less until there is a steady rise – I put $ in my TSP biweekly and since June it’s disappeared immediately, and that’s discouraging. So I have a small pile of cash waiting until I see more definite upward movement (not a zoom, just something more encouraging), which might be this week (dji 11808 as I type).

  6. Maybe gold is in a bubble. Or maybe we are in an inflation bubble, which is driving up the price of gold. If you look at how much money the Fed is printing, I tend to believe it’s the latter.

    Although, silver hasn’t gone up as much as gold, so if you want precious metals then silver might be the best way to do it.

    The only change I’m making in my investments is to buy physical gold and silver, not so much as an investment but to hedge against hyperinflation. I hate the Fed

    • We’re nowhere near being at risk for hyperinflation. We had occasional hyperinflation in the US during the Revolutionary and Civil Wars. But this isn’t Weimar Germany or present-day Zimbabwe. Hyperinflation occurs when you have monthly inflation of about 50% or more, and prices would be doubling in days. In fact the Fed under Greenspan made every effort to control inflation.

  7. When I first got my job, I was allocating my TSP according to what I had learned in my PF and investments classes in college. After a year or so, I looked at the lifecycle funds and realized that the allocation was almost exactly the same as what I had. YTY returns were +/- .10%. For the sake of simplicity, I moved everything over to the L2040 fund. The only thing I’ve done since is move everything from the L2040 to L2050 when it was introduced.

  8. I was investing in a medium risk stock fund with my 401K. It is down about 10 percent this year. I have put my investing on hold while I pay off debt. I tend to agree with Dave Ramsey. By paying off debt with an interest rate is like seeing a return on that amount. Or something like that.

  9. I was investing 300 a month to my roth IRA and I know you’re supposed to keep investing while the market is down but I lowered my investments to 250/month. However I have started contributing 3% to my employee stock purchase plan so I have no idea if that balances out.

  10. I am still almost all stocks. I have some bonds and some physical gold and silver. Most of my gold and silver is from my coin collecting so I don’t see this much as an investment. It is more of a hobby that may (but probably won’t) pay off some day when I am dead and gone.

  11. I have made no changes as a result of the recession, but some adjustments as the result of growing older and closer to retirement. Basically this means a 50/50 stock-bond ratio, rebalancing each year, with the goal of reaching perhaps a 40/60 ratio by age 70. I keep fairly little in cash, only enough for some liquidity, but on the safer side of the equation I have about 30% of my portfolio (which is mostly with Vanguard because of the low fees) in short-term treasuries and inflation-protected bonds. The rest is in the Vanguard Total Bond fund.

    As for stocks, I have most of it Vgd’s Total Stock Fund, with some in Total International, and smallish percentages in the domestic and international small-cap funds. I have also some percentages in the Real Estate Trust and Precious Metals funds, because they don’t tend to move up and down with regular stocks.

    Most of my account is in a traditional IRA, with a small Roth. Since the Roth wasn’t introduced until 1997 and I already had a good-sized traditional, I didn’t want to pay all the taxes and convert at that time. I think this allocation provides a lot of diversification, but on the other hand it’s sometimes suggest that in retirement, the allocation percentages matter less than the rate of withdrawal, which probably shouldn’t exceed 3-4% per year.

  12. Yes, I’ve changed strategy (of at least added to it). Just last week I got into real estate and bought my first rental house. Now is a great time to buy an income producing property. I should be able to get a steady 12-13% return per year for my investment not including any appreciation on the property. The stock market is going to continue to trade in a range for a long time to come and is actually at a lower level than it was 10 years ago. I’m tired of my money going nowhere. I’m still invested in some stocks that are actually growing, but in today’s environment it’s an extreme roller coaster ride.

  13. I’ve picked up about 25 lbs of silver in 2009 and 2010, but I wouldn’t buy gold or silver at today’s prices. It might go up and it might go down, but once it goes down it will be down for a long time. Stocks are the only thing that hedges against inflation and provides good return over time, so I’m about 90% stocks (in funds, not individual) for the next 15-20 years. I’m expecting about 7% return over time, I don’t think we will see 10% average return again in my lifetime, but I’m happy to be wrong! Gold and silver is great for reliability, but to make money you must buy low and sell high, and if you can reliably do that then you should quit your day job and retire rich.

Comments are closed.