I mentioned in a previous post that I have a tendency to be far too conservative when it comes to investing. I spent the first three years of my working life contributing to what amounted to a bond fund investment in my 401k. Talk about the opposite of what you want to do as a 22 year old! I guess it really was a mix of being conservative and not knowing what the hell I was doing.
Well fast forward to current times and I’m up to my old tricks again. No not investing in bond funds, I’ve learned from that. The crime this time is not allocating enough idle money into some good growth stocks.
The Stock Market Always Seems Expensive
Time and time again, I’ve hesitated to buy individual stocks more frequently because the market seems expensive. The Dow was expensive at 12K, at 15K, 20K……… You can see and are aware of the pattern here most likely. My inactivity proved to be costly. So while I was still plugging away indexing into the 401K, I should have had a better (more aggressive) investment strategy with individual funds. I believe that you can have a mix of index and individual stocks, it doesn’t have to be a one way street.
So here we are in 2017, the markets are at all time highs. Not exactly great conditions to combat my ‘failure to launch’ issue. My focus needs to be on the market gains 30 years from now, not 1 year from now. While I have no idea if the market will be higher at this point next year, I feel pretty comfortable saying that it will be in 2047. Probably by a substantial margin if history is any guide.
There is always something intelligent to do with our money, even during seemingly expensive markets. As Jim Cramer says, “there is always a bull market somewhere”. No matter if you like him or not, there is truth to that statement. Perhaps it is small cap funds or international investments. Doing your homework becomes even more important when attractive valuations are becoming harder and harder to find. Don’t be discouraged, just keep going!
Our Investment Plan Going Forward To Keep The Gas Pedal To The Floor
There is no stopping the 401k contributions for my wife and I. I do monitor the performance and make tweaks here and there but for the most part, autopilot mode. Those are very important allocations for the future, but really not that fun to manage. And that is attractive to some people. I like to take more of an active approach however. And thus the beauty of the side brokerage account. This will be the focus for our sidelined cash.
I view the brokerage account like my own personal mini index fund. Except it contains only the companies that I want to own. While it currently has 8-10 different businesses, my goal is to stuff it with 3-4 of the very best of breed stocks from just about every sector.
My favorite part about most of these stocks in the brokerage account? They pay juicy dividends every quarter that keep growing over time. There are few better joys in life than seeing those payments roll in just for looking pretty. Speaking of those dividends, they are all getting reinvested right back in to buy more shares. The beast must be fed!
One thing I’ve learned through the years is not to chase yield. I’ve actually grown quite fond of that 2.5-3% yield range. I will go more if they are in the energy sector however. Much like having a sweet tooth for candy, big energy is my Snickers.
I am contemplating posting dividend results and updates here. More or less to track progress and to provide motivation to myself and the readers. I do enjoy reading about the investment progress of other bloggers out there. Let me know if this is something you’d like to see.
As much as I enjoyed watching the 2000 Baltimore Ravens defense, they had to score some points to win the games and ultimately the Superbowl. There will be a time to play defense with our money, but that is further down the road. Since the accumulation phase is ongoing, there will be a focus on growth stocks with steady and growing dividends. I feel this will compliment our current retirement funds as they keep their steady climb.
At some point, we will flip the switch and use these dividends to bridge the gap until we can tap into those retirement funds. While we have quite a ways to go before that happens, the time to get refocused is now! Sometimes the best defense is a good offense.
Hello readers- Have you had any problems of being too conservative with your investments? How about too aggressive (speculative)? We’d love to hear from you!