The Simple Life

WHEN I STARTED learning about investing, I stumbled upon a book at my library that immediately grabbed my attention: The Lazy Person’s Guide to Investing by Paul B. Farrell. A portfolio championed by the book consisted of just two mutual funds—one stock index fund and one bond index fund, with 50% of your portfolio invested in each.

With only two choices to make, decision-making becomes far more straightforward. Farrell's suggested 50-50 split simplifies the process even further. The strategy underscores the beauty of simplicity—a lesson I took to heart. Why complicate matters with additional funds if just two could suffice?

Diversification is a popular investment strategy. But how many funds do you truly need? Do you need exposure to private equity, gold, real estate? The options seem endless. But perhaps less is more.

For some investors, constantly tweaking their portfolio is comforting. The activity gives them peace of mind. For them, tweaking and touching and buying and selling is a wonderful way to live. Doing something feels better than doing nothing.

Yet a landmark paper, based on Schwab trading data, suggests the more people trade, the lower their investment returns. Often, the stocks they sell perform better than the new ones they buy. That’s why Vanguard Group founder Jack Bogle used to advise investors, “Don’t just do something—stand there.”

All this strongly suggests that investors could benefit by doing less. Frequent trading may reflect overconfidence in our investment expertise. It reminds me of the scene in The Wizard of Oz when Judy Garland and crew drew back the curtain to reveal the Wizard. He’s just an ordinary man, busily pulling on different levers to make impressive sound effects.

My “simplicity is best” approach applies to more than just my investments. My wife and I approach retirement differently. She fills her days with myriad activities. I prefer a more relaxed pace, limiting myself to one significant task a day. This deliberate shift away from my former frantic work schedule gives me a chance to breathe.

Life, I've come to believe, is only as complicated as you make it. My placid life might seem dull to some. But if, like me, you’ve deferred life’s simple joys until retirement, now is the time to embrace them fully.

Time, after all, is our most finite resource. Each day presents an opportunity to savor life's simple pleasures—provided we allow ourselves to do so.

Keeping My Balance

WHEN I WAS LOOKING for a good, long-term investment approach, I didn't just read Farrell's book. I also came across the classic asset allocation of 60% stocks and 40% bonds. I discovered it when I began investing through my employer’s 401(k). The plan used Vanguard Group as the investment provider, and Vanguard Wellington Fund (symbol: VWELX) was one of the options.

It seemed simple: A single fund that delivers a sensible portfolio. I’ve owned that fund ever since. Wellington is a little more aggressive than many other balanced funds, typically keeping around two-thirds of its portfolio in stocks.

I’m not a brilliant investor. I’m a saver. I have no problem holding off on spending and leaving the money in the bank. But I also know there’s a need to grow that money using investments that involve higher risk but also a higher potential reward. Stocks, and to a lesser extent bonds, offer just that.

Using a 60-40 mix allows me to pursue that higher reward without losing sleep. It’s a standard allocation favored by many financial advisors. It might not be the allocation promising the highest return, but it’s not the worst. I know using 60-40 is okay, and okay is good enough for me.

I use 60-40 for all my investment accounts. It’s easy to see if I have too much in stocks or too much in bonds at any one time. If the 60-40 numbers are off, I adjust. It doesn’t take a lot of time or intelligence. Simple.

To me 60-40 is like cruise control on a car. You set it at a certain speed and your car is almost guaranteed to travel at that speed. When I invest in a 60-40 balanced fund, I know the portfolio is consistently functioning at a set allocation. I then let the markets make me money. Simple.

Dry Powder

WE ALL NEED MONEY. To earn it, we have to do something. For most of us, that means getting a job and going to work. The norm is to keep working—and earning—until we’re no longer wanted by employers or we’re unable to work.

Some people inherit money. There’s nothing magical about that. We were just lucky. We had the right relatives. They had money and, now that they’re gone, we have it.

No matter how acquired, what we do with money is how we can get into trouble. Some love to spend it. The stuff we buy makes us happy, at least for a little while. Psychologist Abraham Maslow is famous for his hierarchy of needs. The first order of business is making sure we have the basics—food, clothing and shelter. How people satisfy these basic needs can be wildly different, however.

For a hardy few, sleeping in a tent, wearing sandals and eating what they can forage in the wilderness is enough. At the other extreme, their house must be the biggest on the block, or at least larger than their friends and relatives.

For the elites, wearing the latest Paris fashion and eating meals created by the finest chefs are absolute musts to demonstrate their taste and wealth. Meeting so-called needs in this way can get wildly expensive, even for people who start rich.

After our basic needs are met, we need love and belonging. What we own is less important than what we experience. Many display photos of all the places they’ve been, like the Eiffel Tower or the Great Wall of China. Others cherish the events they’ve witnessed, like seeing Hamilton on Broadway or the Rolling Stones in concert. They gain self-esteem—and warm memories—by spending money this way.

We also get a surge of pleasure from peak experiences shared with others. We may possess home movies of Christmas mornings long ago, showing family tearing open presents under the tree. We gain a sense of love and belonging from these remembered mornings.

A few feel best when they give their money away. Their charitable behavior gives them a feeling of satisfaction. Their money is making a difference in the world and, by extension, so are they. The more money people have, the more that can be given to others in need. Wealthy industrialist Andrew Carnegie wrote, “No man becomes rich unless he enriches others.”

While charity is laudable and spending can bring happiness, I’ve always felt I needed to hang onto money to gain a sense of security. I can weather any emergency that arises and still survive. I think of this money as my dry powder.

In the days of flintlock rifles during the Revolutionary War, you needed dry gunpowder to take your shot at the enemy. If your gunpowder was wet, your rifle simply wouldn’t fire. Maintaining a reserve of dry powder was essential to survival.

Yet, with any behavior, going to the extreme is unhealthy. You can wind up either a spendthrift or a hoarder. I’d prefer to split the difference. I need to buy things, of course, and I do give to charity. Yet, in my portfolio, I’ve always wanted plenty of dry powder for emergencies.

David Gartland was born and raised on Long Island, New York, and has lived in central New Jersey since 1987. He earned a bachelor’s degree in math from the State University of New York at Cortland and holds various professional insurance designations. Dave’s property and casualty insurance career with different companies lasted 42 years. He’s been married 36 years, and has a son with special needs. Dave has identified three areas of interest that he focuses on to enjoy retirement: exploring, learning and accomplishing. Pursuing any one of these leads to contentment. Check out Dave's earlier articles.

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