Boys,
The greatest lie is "it's not that simple". In fact, true genius is always expressed via simplicity.
Without a true teacher or mentor it's taken me 20 years to come to the conclusion that I'm sharing below. The biggest influences on my thinking that you two can also learn from are Jack Bogle (Vanguard and Bogleheads), and Warren Buffet. Bogleheads details the most important parts on The Bogleheads Investment Philosophy:
The greatest lie is "it's not that simple". In fact, true genius is always expressed via simplicity.
Without a true teacher or mentor it's taken me 20 years to come to the conclusion that I'm sharing below. The biggest influences on my thinking that you two can also learn from are Jack Bogle (Vanguard and Bogleheads), and Warren Buffet. Bogleheads details the most important parts on The Bogleheads Investment Philosophy:
- Live below your means
- Develop a workable plan
- Never bear too much or too little risk
- Invest early and often
- Diversify
- Invest with simplicity
- Use index funds when possible
- Minimize costs
- Minimize taxes
- Never try to time the market
- Stay the course
Specific to me and my experience. So far during my adult live I've lived through 11 significant financial events with the US Stock market, not to mention all of the additional localized economic issues in Los Angeles with Hollywood, Manufacturing, Ports, Strikes, and Trade. It was the experience through COVID that was the most telling to me that brought me to where I am now.
The biggest test to an investor is what you feel and do during a market draw down. I watched the stock market sell off 34% and never thought about selling, I wished I had more. This was an interesting thing to try and understand and figure out what to about it.
The answer I realized is having enough cash to feel safe. This number will be different for each person, and will also change through their life as their situation changes. For me right now our family the number is two years. Two years gives me enough cash to be able to make adjustments without doing anything forced or from panic. I've made a few significant changes to my portfolio as a result:
- I've allocated an Emergency Fund (EF) worth one year in a High Yield Savings (HYS) account
- I've switched all of my bond and fixed asset investments to SGOV (the closest thing to purchasing Treasuries I could get without having to do the work myself)
- I've stopped buying any International stock funds and will no longer do so going forward (existing holdings stay to not generate taxes)
- My Asset Allocation (AA) going forward is 90/10 (VTI/SGOV)
My advice to you going forward is:
- Establish an emergency fund. My current rule of thumb is: 3 months to start with, 6 months when you buy a house, 12 months when you have a family.
- Invest 100% into VTI (I use VTI vs VOO for more diversity aka less volatility with only a slight reduction in returns) until you need more cash stability, then go 90/10 as I have.
The most important thing for you will be the amount of time your investments have to compound. Investing early and often will give you a higher return than anything else will long term.
Love you both,
Dad
