For the love of money is a root of all kinds of evil. Some people, eager for money, have wandered from the faith and pierced themselves with many griefs. – 1 Timothy 6:10
Today has been an extraordinarily busy day. There is always something going on at Chez Olsen. And today was no exception. As everyone knows, I took a new job this fall. I’ve been with my new employer for a few months now. And it was high time that I addressed some nagging financial issues. With this in mind, it was time to start consolidating various retirement instruments I’ve collected in the past few years.
That’s right. This week was rollover week. And today was reinvestment day. Over the past few years, we’ve been good at setting aside money in employer-matched 401K instruments. But I’ve never actively managed my portfolio. And it would be fair to say that my inaction has resulted in substantial deterioration of our retirement future.
But there is no better time to address missteps than the present. On Thursday, I opened an IRA account with Fidelity. I chose Fidelity for a number of reasons. First, they are a reputable corporation. Second, they have substantial money under management. Third, they have an immense diversity of mutual funds to choose from. Fourth, they have an excellent suite of investment tools. Fifth, they minimize investment costs if you use their funds. All of these were important. But since I had three 401K accounts with Fidelity already, the lure of an easy rollover with little or no costs to transfer funds between instruments was too attractive to pass up.
Since all of the rollover monies cleared yesterday, it was time to start the allocation process. BTW, this process is no simple affair. Basically, you must select financial instruments that meet your personal goals. And these goals vary between people. For the young, aggressive risk-taking is far more acceptable than it is for those who are rapidly approaching retirement. For me, I expect to be working a minimum of fifteen more years. And with currently good health and a real love of what I do, I think that I have at least twenty more years in me.
If you really want to do a complete risk assessment, seek the help of a professional. Or at least do some serious reading. In my case, I’ve read a whole lot of good books on the subject. The two best books that I’ve read are as follows:
- Mutual Funds For Dummies, Eric Tyson
- Morningstar Guide to Mutual Funds: Five-Star Strategies for Success, Christine Benz
These two books have been quite helpful for me. But there are dozens of great books on the subject. These two are just a start. And if you’re not brave enough to do your own research (or rich enough to pay a huge management fee), you can always choose to invest in a target date fund.
So what were the fund types and allocations I chose? I don’t feel comfortable enough to publicly proclaim my ignorance – at least, not yet. But I chose an asset mix which favors equities more than bonds. After all, I expect to be working (and blogging) for years to come. And I chose a good mix of domestic and international funds. I also struck a balance between intermediate and long-term investments. Finally, I lessened my overall risk by ensuring a really good investment diversity.
Next, I began the process of choosing funds. I chose assets with good track records. And I avoided sector-specific funds. I also decided not to invest in index funds (i.e., ETF’s). I read a lot of fund prospectus documents. [Note: I read the first few pages.] And I checked with Morningstar on the track record of each fund I considered.
If my decision process actually results in better-than-market returns, I will surely publish my processes and my thoughts. And if I really screw up, I’ll probably post that as well. Either way, I am sure that some of you can learn from my successes and failures. And if I’m lucky, you may leave some comments that may learn from.
Either way, my work on this is not yet done. Indeed, I am learning as I am doing. Nevertheless, there is one simple truth I’ve realized thus far: I am taking concrete actions to become more involved in my future economic outlook. Let’s hope that each of you have already taken the first few steps towards your own financial independence. If not, today is the best day to start that process.
But let’s remember that planning for the future and abandoning the present for a “hope” that is beyond your reckoning are two separate things. We are to be like the lilies of the field. Trust that God will be with you through every step. And always invite him to be part of the decision-making process. Pray as you research. Pray more as you invest. And always remember that your father in heaven will be with you regardless of your successes or failures.
-Roo
