Don’t let anyone tell you that wealthy people don’t invest in mutual funds, stocks, and bonds. These traditional investment categories are the backbone of most portfolios and, in many cases, they are the only assets wealthy people invest in. You have not outgrown stocks and bonds just because you have new money.
That’s from the book Sudden Money: Managing a Financial Windfall. And although that book is about managing a lot of money you receive from a windfall, like an IPO, I believe the sentiment is pretty universally applicable to anyone investing.
It’s really tempting in the investing world to get complicated. To get fancy. Makes us feel smart. Maybe even makes us sound smart. But there is no need to get fancy. There is, in fact, an anti-need to be fancy.
There is NO NEED to Get Fancy. Just Listen to Nevada.
People in the tech world, and particularly people in tech who get a windfall from an IPO or the like, seem to think they have to invest differently than they did before they were “wealthy” (the quotation marks because all things are relative).
They’re now considering angel investing. Or real estate. Or crypto. Or…whatever. It doesn’t matter.
Let me introduce you to the guy who manages the Nevada State Pension (or at least did, as of a few years ago). In 2016, the Nevada State Pension had $35B.
Do you have less than $35B? Yes? Good, then this is a useful comparison.
From this article in 2016, behold how the pension fund manager manages all $35B:
That’s where Steve Edmundson manages the Nevada State Pension fund — which, at $35 billion, is just about the same size as the Harvard endowment. Nevada’s State Pension fund, however, differs from Harvard in other crucial ways.
First, Steven Edmundson is the only investment professional managing the Nevada State Pension Fund. The University of Nevada, Reno, alumnus has no other internal professional staff.
His investment strategy?
Do as little as possible — usually nothing. That is because Edmundson invests Nevada’s pension fund’s assets in low-cost passive investment vehicles.
Now, I ask you, if good ol’ Steve can put all $35B into low-cost passive investments, why can’t you?
Other Ways to Keep It Simple
Complexity can manifest many ways. And the more complex your finances are, the more complex your investment portfolio is, the less likely you are to understand what’s going on. The less likely you are to do the work to stay on top of it, because it’s just too damn much work.
As I noted above, low-cost passive investments are one way to keep your investments simple.
And there are other, utterly un-sexy ways to keep your investing life simple:
- Minimize the number of accounts you have. Maybe you have multiple accounts because each account is targeted at a specific goal. Cool. Fine. That’s reasonable. But if you have 4 old 401(k)s hanging out there, consolidate that!
- Minimize the number of investments you own. Instead of owning a large cap fund, small cap value fund, a mid cap fund, and a bond fund in your 401(k), can you just own a single target-date fund?
- Don’t touch your investments very often. There’s a seemingly apocryphal story about a Fidelity study showing that the best-performing accounts were ones that were forgotten about (and therefore not touched for years). Even if that story itself isn’t true, there’s plenty of evidence showing that the less you touch your investments, the better they’ll do. (Sorry, Robinhood!) So, you can feel good about choosing that target-date fund in your 401(k) four years ago and never looking at it again. It’s a feature, not a bug!
Turn Off Slack
I mean this both literally and as a proxy for turning off the non-stop nattering in your ear from friends, colleagues, and the media about how to invest. Go read one or two of the classic investing books and Be Done With It. I recommend:
Many of our clients get soooo stressed out reading their work’s Slack channel, where there are 10s, 100s, even 1000s of people chiming in about what they believe about investing. But I ask you, what do any of these people know about you and your life? Until someone knows you and your life, they have No Business advising you on how to invest your money.
As a colleague once aptly wrote, Life is complicated. Investing shouldn’t be.
Do you want to work with a financial planner who can help bring simplicity—and therefore understanding, control, and comfort—to your investments? Schedule a free consultation.
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Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Meg Bartelt, and all rights are reserved. Read the full Disclaimer.
