Building a successful portfolio to last a lifetime is as simple as embracing the three principles found within my book, The Coffeehouse Investor:
- Don’t put all your eggs in one basket — diversify in different asset classes that reflect your need and ability to take risk.
- There is no such thing as a free lunch — capture each asset class return through low-cost index and passively managed funds.
- Save for a rainy day: Your personal financial plan should offer clarity on how much you should be saving while working, and an appropriate level of spending when retired, so that you can retire on time with a portfolio that lasts a lifetime.
When you simplify your portfolio and financial plan, it accentuates your portfolio returns within each asset class. By that I mean, if you have a 60/40 stock-bond split, and the benchmark return on that mix is 5 percent annualized over the next 10 years, you will approximate that number, instead of underperforming it by switching from fund to fund based on what is in vogue at the moment. More importantly, it allows you to focus on financial-planning issues that actually matter, like asset location (i.e. the type of account — taxable, tax-deferred, or Roth — in which the asset is held) for tax efficiency, adequate insurance coverage, and estate planning that reflects your legacy wishes.
The most important component of embracing simplicity in building financial wealth might be that it allows you to focus on the type of wealth that matters most of all — the spiritual wealth of sharing your talents and wisdom with others in a way that brings meaning to all.
While the financial industry is intent on filling your portfolio with the “perfect” investments, maybe you are better off turning away from that empty energy, and instead reflecting on how you can invest your treasures in making a difference in your world.
Our society is quick to highlight the go-getter, but why not turn that upside down and present yourself as a “go-giver” in the way you connect with your family, your community, and your world at work? In doing so, you immerse yourself in the energy of the universe that reciprocates by filling your spirit with meaning and purpose.
Giving doesn’t necessarily mean writing checks to local nonprofits, although that in itself is a wonderful way to connect with the community. Giving also can be found in ways that are nonmonetary, but still touch peoples’ lives just the same.
Give a compliment to three people you engage with today. Commend them on their job performance. Thank them for helping you. Recognize their presence in the world.
Give an ear. As humans, one of our greatest needs is to be heard, to tell our story. When you recognize that need in someone and listen, I mean really listen, you give a gift from the heart. Instead of responding by sharing your own comments, ask them a follow-up question, and then another question after that.
Give your time. If you want to capture the good energy of the universe, you have to immerse yourself in the energy of the universe, and that evolves through a commitment to your community, in whatever way you deem appropriate.
The old maxim, “The more you give, the more you receive” is authentic if you make it authentic in your life. Today is the best time to start.
Bill Schultheis is the author of The Coffeehouse Investor: How to Build Wealth, Ignore Wall Street, and Get on with Your Life and The New Coffeehouse Investor, the third edition of his popular 1998 release. Schultheis lectures, leads seminars, and has appeared on NPR and local broadcasts. He is a partner and a fee-based financial adviser with Soundmark Wealth Management in Kirkland.