Weekend reading: Don’t sweat the details
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I call this my SOS Strategy
… Sub-Optimal-Simplicity
Particularly useful if/when others have to manage/inherit the process in due course …
I’m also pondering simplicity vs optimisation – I completely agree that it’s common to over-focus on optimising the tiniest things that make no actual difference.
But I think the focus on anxiety over-simplifies. The fact is, many of the type of people who read financial blogs on a Saturday morning find all this stuff FUN – it’s a hobby as well as financial prudence. Now, we can argue about whether it’s a “better” hobby than golf or trainspotting or whatever floats your boat, but if we are enjoying the optimisation, learning, sharing with others, etc., then that’s a different calculus than if we’re fretting away our lives worrying about a 3.5% vs 4% SWR.
Jelly is completely right that planning for somebody else to take over needs to be part of it, and understanding that they’re unlikely to share the same hobby!
@Tubaleiter yes that is part of it. I absolutely love the analysis and thought that goes on behind a lot of this stuff, so for me personally it’s not anxiety, but perhaps more a question of where to draw the line. I linked to Finumus’s piece on ETF selections in part because I tried to do that myself – i.e. building my own low TER fund selection – and it took ages, admittedly did save me a few basis points, and then Finumus came up with a far superior solution to my hodge-podge anyway. Sometimes it’s quite refreshing to look at problem, figure out that optimising it might save me £20 per year, and then decide not to care!
Very timely as this week I’ve been pondering moving from FWRG (0.15 fee) to ALLG (0.07) and CSH2 (0.10) to GBPO (0.5) – which would at face value, save me approx. £120 a year. But then there’s tracking differences, spread etc. etc. I have enough plus also DB pension, rental property. Why am I worrying about £120 a year in my DC pot?
Successfully followed this SOS strategy for many years now -2 equity index and 1 bond index funds only plus some cash -now 23 years rtd
Only difference is that I had a backbone/structure of a set Asset Allocation that really only moved over the last few years from 30/70 to 40/60-thats its final stage probably
Just drew down what was required keeping Asset Allocation intact -mostly was equities but occasionally bonds and occasionally a bit of both
However my actual main constraint or real contribution to simplicity was my early recognition my “limited “financial abilities and great awareness of my mathematical limitations
I do however greatly enjoy following the financial market place but all my learning over these many years continues to convince me to KISS -keep it simple stupid!
At 80 now will no longer be chasing the pennies -it has actually turned out to be unnecessary-so far!
xxd09
I’m definitely a glide path proponent for my portfolio; I think it works particularly well for the gap between retirement and DB/state pensions kicking in. I’m 3 years into early retirement and 6 years away from the pensions kicking in. I’m spending down bonds only which increases the equity % such that, more or less, I’ll be 100% equities when the pensions arrive. The pensions will pay ~90% of living costs (hopefully)
I also followed the glide path for my paid working life. Parachuting out of a stressful yet well paid tech job into the civil service then finally a charity. I could have retired earlier with a bigger pot but the tradeoff for lower blood pressure was absolutely worth it.
We all have a limited amount of intellectual effort to expend each day, and question is where we spend it. Managing my portfolio is a necessary task, but, for me, not a particularly pleasurable one. It’s a bit like mowing the lawn. Yes, there is a certain satisfaction in a job completed and ticked off, but with the nagging knowledge that you will have to do it all over again in a couple of weeks. It’s not like learning a new guitar piece, or planning and executing a successful astrophotography session. So for this part of my life I am a satisficer, not an optimiser.
Some of the AI thinking is both deficient and alarming. Altman “Sam Altman says AI can replace talking to your kids”, is displaying the usual boosterism. Quite apart from the hideous implication of not bothering to talk to the young anymore, it is not clear that it is solving a problem that the majority are struggling with. Maybe it is different for tech-titans, but I can’t see this helping the average Joe or Joanna. One thing that was drummed into me throughout my career was that most innovations are destined for “the scrap heap of history”, and the dominant reason for an innovation to fail is that it solves a problem the customer does not have.
On the other boosterish article that we should not worry because technological transformation always ends up generating more jobs than it destroys, well yes, history says in time it will, but the question is what jobs, where and how quickly? A transition that is too fast and unsupported by social policy can be horrible for very large numbers of people, even if net more new jobs are created requiring different skills and located in a different geography.
Plenty of people and localities still bear the scars of the decision to switch the U.K. from a manufacturing to a service economy.
With US companies I am familiar with already shedding staff because they have been assured AI will do the job faster and cheaper, this looks like it could be one of the more rapid and disruptive transitions, even if it works (and on the doomer side, Ed Zitron says it can’t because the economics don’t work).
I enjoyed the Dollars and Data article positing that, as perceived time passes more slowly when you are young, you need to spend more in real terms on experiences in your later years to get the same bang for your buck as when you were younger. Furthermore, the differential is conceivably the same as the real growth that could be expected over the period if the money, instead of being spent when young, is invested for your later years. Thus spending money on experiences when young is equivalent to and as valid as investing it for later enjoyment. The biggest crime, according to the article, is forgoing experiences when young, investing the money thereby saved, but not spending the accrued money in later years.
Realising that I have more than adequately provided for my retirement, I have begun to ramp up my spending on experiences (principally travel) while I am still able. Although I was far from a spendthrift when younger, I am not conscious of any significant self-denial of anything I wanted to buy or do.
@Frugalist agree – like so many things, it’s all about balance. I’ve got my own hodge-podge, with the extra complication of having started my working life in the US and being a dual citizen, which brings lots of “fun” tax catch-22s. But I’ve, so far, resisted the urge to cross my own line into “over-complicated” – all my hodge-podge, include pseudo-indicies of individual stocks in our ISAs, pretty much adds up to VWCE with a small UK home-country bias and a 50% equity cap on the US. Couple of boring bond funds, and Monevator has convinced me to just barely start allocations to gold and commodities. But no factor investing, no individual stock picking, no trying to time the market, no options, and so the list goes on. Will see what drawdown looks like when I get there in another decade or so, but probably something similarly “add complexity but not past the point of rapidly diminishing returns” – probably more on the picking which accounts to drawdown first side than on any fancy allocation strategies. “Satisficer” is a good term, as mentioned by old_eyes.
I think that’s what’s important – everybody to find their own balance. For some people, that’s an investment strategy that fits on a notecard and still gets you probably 95% of the way to “perfect”. For others, it’s an all-consuming passion but they love it. Most of us on Monevator will be somewhere in the middle!
Another interesting article. Unlike xxdo9 I couldn’t come to terms with selling down the portfolio in de accumulation, instead I have gone down the natural yield route, accepting a 6% yield and withdrawing 3%. It does take away the urgency of checking the portfolio, and it has reduced the amount of thinking about the same (which is an issue for retirement), but so far, and it is early days, the system is working as planned.
I did wonder about dividend harvesting as practiced by some on X, but at the moment it falls into the CBA folder
Enjoyed the Grumet articles thank you – definitely food for thought and an interesting Claude backtest result share in the comments too.
A not unrelated comment: I heavily suspect your “Monevator readers are better informed than 80% of the population” estimate is about 19% shy of the truth!
@Steve B: you mean, 19 percentage points, right? And now your suspicion has been well and truly demonstrated!
@steve B which are the Grumet articles?
@vanguardfan the first two links in the first two paragraphs of the introduction
@Steve B I did wonder if someone would challenge me on that! I suspect you’re right but I didn’t want to be too arrogant on the collective readership’s behalf!