How did you decide on your investment strategy?

[Yoheadden]

There are practically as many ways to save and invest as there are people in this forum. Whether you send in regular amounts (dollar cost average) or day trade, how did you come across your strategy and how do you block out all the noise(news) that tells us we need more of this or sell that to keep our portfolios staying in the black? Are you going to try and live off of the dividends/capital gains and preserve your capital or spend the last dollar on your last day?

I for one, like many on here, didn’t grow up in a well to do family and knew nothing about finances except to make money, pay bills and enjoy the rest.
Luckily DW is frugal and her family opened me up to the concept of saving for a future. So we maxed out our Retirement plans, SEP, than Simple. Added in Roth IRAs and HSAs then put any extra in after tax accounts. We treat these savings just like monthly bills and got addicted to watching the balances increase. I have always been curious and tried to improve through reading or watching programs, but this curiosity is sometimes a double edged sword. This has led me to this thread. With so much information available, I.E. emails, investment letters, forums, etc, how did you decide what route to take and keep on track ?
I’m not talking about the next hot thing (bit coin), but what I consider an overload of information.

Thank you for sharing your strategies, thoughts and ideas…

 

[pacergal]

Very blindly at first.
Both my folks were strong on the "save for the future". Dads motto when growing up was Savings first, give to church (or charity of your choice), the rest is your budget for living.
He invested in the market. I learned so much from him over the years.
DH had no financial savvy, came from a very poor family.
So we had a slow start.

Luckily, we landed in govt jobs fairly early on and money was automatically put aside for our pension. Later, we also saved in the 457. At that time, I blindly invested 50/50 aggressive stock/bond. For us, having money taken out pre tax was the easiest.
We both stuck with those jobs, even though we could have been paid more in the private sector, because of those pensions. Now I know and understand why my Dad encouraged me to consider the pension before I took another job!

Attended classes about retirement from work when offered, also had two free visits with FA via pension program through work, which were helpful and did not involve any selling of their services.

about early 2000's, Started watching Suzy Orman on her TV show, and also a show called "Til Debt do us part" with Gayle Vaz-Oxlade, Both gave me understanding of savings, spending, "Needs vs Wants", and budgeting.

About 10 years prior to retirement, found MMM, bogleheads forum, and here via retirement calculator articles.

Messed up quite a bit along the way, but finally via the wisdom on this forum, learned to find and set an asset allocation that allows me to sleep and not mess with it.
Our investments are about 70/30, we have our pensions and SS.
We also do have a trusted, fee only FA we have been going to for about 8 years.

I still budget, and the Need VS Want guides our spending.
Someone here on the forum once wrote about spending "Is it truly necessary? Do I really want it?" We ask ourselves those questions on bigger purchases/expenses. If the answers are yes to either one, and we can afford it, we buy.
I also have another quote from the forum "You are no longer in a savings mode, you are in a slow spend down mode".

I'd like th thank the folks who shared those. They guide me all the time!

 

[OldShooter]

... I’m not talking about the next hot thing (bit coin), but what I consider an overload of information. ...

What you are seeing is often called "FUD." For Fear, Uncertainty, and Doubt. Beginning with the availability of inexpensive computing power and good investment databases about 60-70 years ago, the conclusion has become obvious: (1) Over the short term (a few years) the market is unpredictable, approximately random. Hence, investment in broad indexes is an optimum strategy. (2) Over the longer term there is an upward bias. Hence, to capitalize on the bias, investing must be long term.

The most recent edition (May 2021/Eighth Edition) of Charles Ellis' book "Winning the Loser's Game" is probably the best place to start. The classic is Burton Malkiel's "A Random Walk Down Wall Street." I just discovered that there is a new 2023 edition, which I have today ordered but not having read it yet, I cannot recommend it.

Why FUD? Simple: The Labor Department estimates that there are about 1 million people working in the investment industry. The income of the majority relies on the investing public believing a couple of falsehoods: (1) Stock-picking by experts works, and (2) frequent trading is necessary for investors to make money. Both of these falsehoods, of course, optimize the income of the investment industry. Sadly, the FUD has been very effective and there are many believers. What there is not, however, is any hard evidence that either belief is true.

Re "overload" just stop reading that stuff. Problem solved. Remember Warren Buffett's observation: “The stock market is a device for transferring money from the impatient to the patient.” Investing is boring; if you're not bored you are not doing it right.

 

[Car-Guy]

Capital preservation of my base funds (bucket 1). I knew before I retired I had more than enough and had "won the game" so why risk it. I sat aside bucket #1 (2m) and stuck it in very conservative investments. I'll probably never need it. Bucket #2 is for everything else. Bills, food, travel, hobbies, cars, higher risk investing/equities, etc. Makes it simple.

 

[walkinwood]

I went from listening to a friend to a short romance with investment newsletters to thinking I was a stock picking genius during the late 90s.


After the internet bust, I read Four Pillars of Investing, Random Walk Down Wall street, Asset Allocation by Rick Ferri and a few other books. I sold all my individual stocks - many at a loss and invested mainly in very low cost, broadly diversified index funds.


I do not act on anything the press or anyone says now. When my portfolio is out of balance, I re-balance. I try very hard - though not always successfully - to re-balance when stocks tank. That takes courage I sometimes lack.

 

[W2R]

Simple. LBYM was in my blood, luckily. Therefore at some point many years ago I had saved up some money, so I asked my brother George about how to begin investing. He has always been interested in money and investing, me not so much, but I trust him completely. He told me about Vanguard, recommended VFINX, and told me he had complete faith in my ability to figure all this out myself and my lack of self-confidence in this matter was unjustified.

Yes, George is the big brother everyone wishes they could have had when starting out.

So I invested $5K in VFINX, and then found an online group called "Vanguard Diehards" over at Morningstar that either became or led me to the Bogleheads. Then I ordered five books of my choice from Amazon that looked like they would be the most helpful, choosing them from the Bogleheads booklist. I read each at least twice, and studied them intensively. (Coincidently, these included all three books that walkingwood mentioned in his post above! That's so cool. )

One thing I learned from what I had read, was to make a written plan and stick with it come h*ll or high water. So that is what I've done. Sounds easy but I put a tremendous amount of effort and study into it over a couple of years since I knew the success of my plan would mean life or death for me. Then when I was sure I was ready, I wrote down everything.

Anyway, I don't change my investments according to what is the latest thing, or what people on forums say, or what Jim Cramer says. I just stick to my plan. Always. This works for me.

I hope this is the kind of information you were looking for! I wasn't sure exactly what to write about in this post.

 

[Gumby]

I invest for total return. I generally ignore tax treatment in choosing investments because I mostly invest within my tIRA, Roth, 401k, 403 and 457 accounts. If I had been wiser, I would have saved more in taxable accounts, then I would care more about taxes.

When we were young, we were 100% stocks (which killed us in the 2000 dot com crash). After that, we went to a 70/30 allocation. For a while, I picked individual stocks, but it takes more time and energy than I care to devote to it, so now it's all in mutual funds, except for two remaining individual positions. Most but not all of it is in VWENX. There is some money in various 401k and 457 accounts that we did not roll over to tIRA, and VWENX is unavailable in those accounts, so we have an allocation in the available choices that roughly duplicates it.

I don't anticipate substantial changes as our retirement progresses, so we'll remain between 65/35 and 70/30, mostly in VWENX.

A crucial philosophical point is that I am not fixated on extracting every penny of value from my portfolio. We just need to have enough to make it to the end, and so far, we do. That helps me ignore the overwhelming majority of the noise surrounding markets and investments.

One important caveat to our experience is that our pensions and social security cover all of our living expenses and some moderate travel. We only take money out of the portfolio for extraordinary expenses.

 

[audreyh1]

I did a lot of research before retiring. By the time I was getting ready to retire I already had a good idea of what I wasn’t good at and some lessons from investing traps I had fallen into in the past. I had a good idea of how my personality affected my investing and so I set clear goals about my investing approach during retirement. I wanted minimal effort and absolutely no market prognostication required. I wanted to keep up with inflation over the long run and yet avoid extreme short-term volatility. I wanted to be able to ignore the market for long periods - up to a year.

So I chose an easy asset allocation that met the above goals plus rebalancing around once a year. I also ended up with a buffer covering a year or two of annual expenses to facilitate cash flow. I chose a withdrawal amount based on each end of year portfolio value. I decided I could live with variable year-to-year income. This has worked very well for me for 20+ years now.

Interestingly, before retiring I was pretty much 100% stock, a huge amount of it company stock options. So I was lucky that concentrated risk paid off for me.

I absolutely do not watch financial TV or news for a long time now. It’s worthless. I do have a watchlist just to track a few things - never urgent. Before retiring I had followed market coverage avidly so I guess I had already become fairly immune to the ridiculous talking head noise.

 

[monte1022]

I wrote my first retirement plan in college. Nearing graduation, I came to the realization that I did not want to work until 65. At my first professional assignment, my manager told me that he had actually made more in his 401k from gains than contributions. That gave me the mechanism to potentially retire early. From that point forward, I(we) saved like maniacs. However, I got caught up in 90s stock market hype and lost 600k on AOL. A post from a physician online talked about his three friends making him rich. He went on the list 3 mutual funds (his friends) and said that he just kept contributing not matter what. That was the pivotal moment that changed my thinking and set the course for our current 3.7m net worth (3.4investments, 300k house) We had zero net worth in 2004 when the plan started and earned 120k/yr. We were earning 220k/yr when we pulled the plug spring of this year. I kept us at 100% stocks until 4 years ago. I knew full well that bonds could not get me to the goal. Fidelity did their best, but failed to change my thinking, thank goodness. We are holding at 50/50 on a rising equity glide path.

 

[frayne]

Reading a number of self help finance books in the 80s, 90s and 2000s and discovering and loving the simplicity of John Bogle's index investing philosophy.

 

[athena53]

Not sure of your age but I started out in a different era- graduated from college in 1975. Dad had started investing when I was a teenager and the market was far less accessible (he had to go Downtown to The Stockbroker, watch the ticker display, pay steep commissions) and you were lucky if you had access to Value Line charts and daily quotes in the paper. So, part of my story may not be that relevant if you're starting out now. I wish I'd had ETFs, for example. Many here are doing very well on a basket of a few ETFs with periodic rebalancing.

Sometimes I was constrained by employer plan offerings- I had a couple of truly awful 401(k)s where I had to contribute to get the match but the investment options weren't all that great. I learned to invest that money in the "safe shot" options such as money market funds and invest after-tax funds in brokerage accounts where I had better choices. I also rolled over 401(k)s into a self-directed IRA as soon as I left a company.

Some "macro" stuff that helped:

1. Live Below Your Means. Looks like you've already figured that it and that's huge.

2. Keep things simple. I have way too many moving parts in my portfolio and am trying to simplify but in the meantime it complicates things because another of my rules is to periodically weed out underperformers and then hold on through downturns. The good stuff recovers.

3. Look at the long run. It was an interesting lesson in the October 1997 crash to see how quickly things recovered. Same with the March, 2020 crash. Panicking and selling at the bottom would have been a bad move.

4. Find a few sources you trust and don't pay attention to the rest. My two sources are Fidelity's rating systems (they have weighted analyst consensus average based on their track records and then a lot of detail) and Jim Cramer's overall view of the market. Note that many hear don't like Cramer and he can be hyperactive and bombastic; his interviews with CEOs can be a bit too adoring as well. I don't buy his individual recommendations unless Fidelity research confirms them. What I DO like is that most of the time his overview of the market and explanations of what's happening make sense and he's never making simplistic recommendations to either buy or sell EVERYTHING RIGHT NOW.

5. Learn from your mistakes. The earlier you start investing, the easier it is to recover from them.

When I started looking ahead to retirement around age 55, I created a simple spreadsheet starting with what DH and I had, with projected additions by year, and some assumptions about investment return and inflation, and ran it through to age 65. I think I used a 4% initial withdrawal rate. That's what gave me my first real estimate of income in retirement. There's far more sophisticated stuff on-line now but it was a start.

I actually retired at 61 and life is good.

 

[Katiek]

Somewhere during my life, my Dad introduced me to low cost index funds which were my main investment product for most of my life. Along the way I tried out a few other things, mainly for my "secure" buckets. I had a few other investments that I tried for various reasons, but have learned I was probably best off just sticking with my Dad's approach.



I've also recently read a bunch more in books and websites like this one so at least now I have a better understanding of why my Dad's approach was generally a good one.

 

[FiveDriver]

Back in the early 70's I got my first job with a decent salary. I would cash that check, pay my monthly sports car loan, and stash the rest in $20 dollar bills in my dresser drawer. Those were the days when you could blow through an entire week's pay over the weekend.

But soon, that stack of Twennies in my top drawer started to get pretty large.

One of the older fellas in my department had done well in the Stock Market. He showed me his folder full of Mutual Fund statements, and said do some research. With no Internet, you had to go to the County Library and look in their Reference section. Their big binder was updated with new pages -- once a month !! But this, and Louis Ruykeyser's Wall Street Week, was all I had to go on.

When the Traditional IRA was first introduced in the mid-70's I opened one up with Fidelity, more as a Tax Dodge than a Retirement Fund. But it grew, slowly at first.

In 1981 our company offered a 401K plan. We could buy AT&T Stock, at a discount, and no brokerage fees. I was buying this Widows & Orphans stock every month. It took off with the rest of the Bull Market in 1982. I had no idea about allocation within my 401K, so I was 100% in T.

Suddenly in 1996, Ma Bell spun off Bell Labs and Western Electric into Lucent Technologies. Before I had a chance to make any changes to my allocation.....LU became the Darling of Wall Street. Every Mutual Fund had to own this. That stock would double, then split 2-for-1, then triple and split 3-for-1, then double again. I had a mental Stop Loss under my balance, so when the inevitable drop happened, I transferred it all into a Stable Value fund. I lost about 10% but I learned a lesson about Asset Allocation and about my Risk Tolerance.

I managed to miss the 2008 Crash because I had started a transfer from my 401K to a self-directed Rollover IRA. I had designated a Money Market Fund as a landing spot in the new Rollover IRA until the sub-prime mortgage kerfuffle settled down.

I claim no special skill in Market Analysis. I've simply been in the Right Place at the Right Time more than once.

 

[rk911]

it was partly my BIL's advice, reading Money and listening to Bob Brinker. that has served us well over the decades.

 

[Koolau]

Mine sorta grew like topsy. Once I got into Vanguard, I would research the funds and see what made most sense for me. I learned a lot here and by reading books. I've been fairly static for the past 10 years. I try to rebalance as much as possible by taking my RMDs from "bloated" funds. Mostly w*rks for me.

 

[aja8888]

Investment strategy.....Uhhhhh....it just happened along the way.

 

[Koolau]

My original (first 30 years) of investment strategy was to SAVE, Save, save! I finally figured out how to invest.

 

[2017ish]

After I graduated law school, when DW was finishing med school, I read every interesting investing/finance book in our local library. (No family help; dad was bricklayer, and none of my sibs went past HS.)

Was apparent that we should max retirement account contributions and go 100% equities. That worked well. Switched gradually to 70% equities in the several years before we retired, which is where we've stayed in retirement. (Retired at 57/56 in 2017.)

 

[jollystomper]

My original (first 30 years) of investment strategy was to SAVE, Save, save! I finally figured out how to invest.

Reading a number of self help finance books in the 80s, 90s and 2000s and discovering and loving the simplicity of John Bogle's index investing philosophy.

These two items summarized my approach.

My family got to the lower middle class level, and my parents emphasized saving. After college I started on focused on saving (hearing a colleague at Megacorp who was 7 years older state he had only $500 to his name put a chill on me) but I did not think about investing until older co-workers figuratively beat me up about opening a 401K.

Then I started reading several self-help financial books, and started investing in mutual funds. Of course, I was chasing the "best ones", and then in the mid-90s everybody looked like a genius buying individual stocks. But fortunately I came across John Bogle's philosophy in the late 90s and began simplifying things and doing a better job of DCA'ing at much higher amounts, regardless of what the news of the day was. The timing was fortunate, as my salary jumped in the late 90s, but DW and I committed to not let "lifestyle creep" get control of us.

 

[rkser]

Maxing Office retirement Profit Sharing (Now IRAs in retirement) + automatic monthly transfers from our bank to the after tax Vanguard Equity Index Fund & rest the Market did it for us.

DW is a house wife, we retired at 60/55 after kids flew from the nest.

We maintain 70/30 now in a sizable portfolio (for us) , interestingly equity is increasing with age.

We prevented any financial advisors from coming near us. Bogleheads Forum helped us on the way.

 

[target2019]

There are practically as many ways to save and invest as there are people in this forum. Whether you send in regular amounts (dollar cost average) or day trade, how did you come across your strategy and how do you block out all the noise(news) that tells us we need more of this or sell that to keep our portfolios staying in the black? Are you going to try and live off of the dividends/capital gains and preserve your capital or spend the last dollar on your last day?

I for one, like many on here, didn’t grow up in a well to do family and knew nothing about finances except to make money, pay bills and enjoy the rest.
Luckily DW is frugal and her family opened me up to the concept of saving for a future. So we maxed out our Retirement plans, SEP, than Simple. Added in Roth IRAs and HSAs then put any extra in after tax accounts. We treat these savings just like monthly bills and got addicted to watching the balances increase. I have always been curious and tried to improve through reading or watching programs, but this curiosity is sometimes a double edged sword. This has led me to this thread. With so much information available, I.E. emails, investment letters, forums, etc, how did you decide what route to take and keep on track ?
I’m not talking about the next hot thing (bit coin), but what I consider an overload of information.

Thank you for sharing your strategies, thoughts and ideas…

Our plans were started by a young woman from Texas (M-I-L) and young woman from Philadelphia (Mother). Both were poor, and grew up during the darks days of the Great Depression. The core belief was, "You must save money amd only spend what is necessary." So we both lived that growing up, especially as the families had 4-5 kids. There were many hand-me-downs.

I think the second lesson came around 45-50 for me. We didn't have enough saved, and really didn't participate in the market. So I read a lot of posts at BH, got a recommendation or two, and read several books (Bogle, Bernstein, etc.). Going through the Great Recession helped us a lot. We stepped up our automatic investing a lot, and were able to catch up, in a way.

We're 60/40 kinda people, and at this time have more fixed investments than ever. It has become like two kids in a candy shop. I don't beat myself up over the past. I made mistakes, but my grade is not very important.

I don't think others are wrong with very different strategies. I have stronger opinions now, and feel thaat you can blend your own strategy and get the prize.

Blocking out the noise is not important. A lot of the noise washes over me. I see it in my feeds. But it's like many of the other intrusions we have in the world. I keep it on, in the background, and of course there are certain channels which I feel are harmful, and just never include those in my background playlist.

My strategy is still evolving. It's all good. Time is on your side with investing. But you do have to move forward with decisions, as time is working against you as you grow older.

 

[Midpack]

DW and I are naturally LBYM, raised in frugal households, so saving wasn’t an issue at all. I started as an active investor in 1987 following Peter Lynch, holding almost nothing but MSFT, INTC and CSCO. While that paid off handsomely (10-15X), by 1990 I knew I didn’t want to take as much risk once we had more substantial nest egg. I maxed out my 401k for more than 20 years. So did DW. And our taxable account grew substantially, I diverted more of my net pay to taxable than I took home for many years. In the 90’s I gradually migrated to Bogle, but in 2002 once I read The Four Pillars of Investing I followed that wholly and exactly. I still mostly use that approach even though Dr Bernstein has moved away from those recommendations somewhat (a lot?). All I’ve done is change my AA from 100% during the active years in my 30’s, to 80:20 in my 40’s to mid 50’s, then 60:40 when I retired, and now 50:50 where expect to stay for quite a while.

 

[ShokWaveRider]

for us, simple; the safest with a steady return. Nothing has changed since we started saving in 1990 (Beginning of High earning years). Yes, some years we only made 3%, but we never lost capital in any given year that I can remember ... inflation notwithstanding. This allowed us both to retire in 2002 (The first time to go sailing for a number of years). We did go back to w$rk when we returned on our own terms for a while (Got bored) before retiring for good in 2010. No we are not in the top 1%, but we are doing better than most.

 

[athena53]

After college I started on focused on saving (hearing a colleague at Megacorp who was 7 years older state he had only $500 to his name put a chill on me) but I did not think about investing until older co-workers figuratively beat me up about opening a 401K.

A story about someone else stuck with me, too, but it was the opposite. Managers at my company were talking about a coworker at their previous company who had been told he was being promoted. He didn't want to be promoted, he said. He liked what he was doing. They told him he had no choice.

He ER'd instead. Last time I looked him up in the directory of my professional society, he was still retired and living in FL.

I was only 27 at the time but that stuck with me- having the luxury of quitting when your BS bucket was full. That's what I did at 61.

 

[COcheesehead]

Before retirement it was easy, save til it hurts & invest 100% in equities. As the pile grew and I neared retirement it was less about growth and more about capital preservation. I won the game, now I just wanted to hold onto the winnings. It was then I discovered Michael Kitces who has some really good thoughts and strategies for navigating what he calls the retirement danger zone - 5 years before and 10 years after retirement.