“Your life should be interesting – your investments should be boring.” – David Bach, The Automatic Millionaire.
A reader asked the following:
I have three types of accounts:
- Workplace 403(b)
- Roth IRA
- Taxable Brokerage
This is going to be boring; grab a cup of coffee. Of course, here’s your classic disclaimer – I am not a professional. What works for me may or may not work for you. Please consult a professional for any financial decisions.
- Workplace 403(b) – This is invested whenever TIAA invests my contributions and my employer’s match. I am paid on the 15th and the last day of each month, but TIAA makes the decision when to invest (i.e., the same day, or later). I contribute 8%, and my employer matches 5%.
I have a limited number of funds to choose from. I have an “aggressive” mix, but some of the choices are “harder” for the average investor to invest into (e.g., Vanguard Mid-Cap Index Fund Institutional, which has a $5 million minimum investment). I don’t have $5 million, but I can invest into it due to my workplace agreement. So, I am not going to talk much about what I am invested in at TIAA, for it may not be accessible to you.
- Roth IRA – I have a retirement target date fund, which invests in a mix of stocks and bonds. As of 2017, the limit to contribute to a Roth IRA is $5500. Every 15th and the last day of the month, I contribute 1/24th of the annual limit. I believe in dollar cost averaging.
- Taxable Brokerage – I have four mutual funds, just four:
- S&P 500 Mutual Fund – let’s call it “A.” This gives me large-cap exposure.
- Total Stock Market Mutual Fund – let’s call it “B.” This gives me, again, large-cap exposure, along with mid-cap and small-cap.
- Total International Stock Market Mutual Fund – let’s call it “C.”
- Dividend Growth Mutual Fund – let’s call it “D.”
I invest the same amount in each mutual fund twice a month (8 x same investment amount):
5th Day of the Month – B
10th Day of the Month – A & C
15th Day of the Month – D
20th Day of the Month – B
25th Day of the Month – A & C
End of the Month – D
Now, if there’s any extra investing, it goes into the smallest (by dollar amount) mutual fund. Once it surpasses another, the next month’s extra investing goes in to the (new) smallest investment.
And, dear readers, that’s how I invest. It’s automatic (except for the extra investing), and it’s boring and quite predictable. Yes, sometimes I invest when the market is high, when the market is low, and when the market is flat. Yet, it gives me one less thing to think about.