Micki, who's looking for a place to put her retirement money, other than under her mattress, is hardly the only woman who’d like a little guidance with investing for her future. Most women don’t have the time (or inclination) to think seriously about investing, except when tax time comes and panic sets in. For some of us, our retirement accounts get less attention than our hairstyles or even our fingernails. But there is a solution….
As a former portfolio procrastinator and investo-phobe, I’ve been there. Although I now spend most of my work days thinking and writing about investing, I realize that most women would rather go to the dentist than read a company annual report. So for these women, among whom I count many of my friends, I’m happy to reveal one of the best-kept but most important secrets of investing. This is one that many brokers and fund managers would prefer that you not know because it cuts out those lucrative fees and keeps them in your own pocket.
It’s simple, it’s easy, it’s safe, and it’s cheap. It’s used by some of the richest people in the country. So here it is: Index Funds.
The best way to diversify, minimize risks, and limit your expenses is to buy index funds or ETFs (exchange-traded funds) that allow you to equal the performance of the market. And that’s something that hardly any active mutual fund managers have been able to do over a long period of time. (By active, I mean funds that are not simply tracking an index.)
You can check out the Lazy/Busy Woman’s Portfolio on my Web site, Woman with Portfolio: http://www.womanwithportfolio.com. This basic portfolio of three funds, which is fairly standard in the investing world by now, has been called by various names: the Margaritaville portfolio, the Coffee House portfolio, and the Couch Potato portfolio.
These names indicate the minimal amount of time and fretting expended in this investment. I prefer to call it the Lazy Woman’s Portfolio, which is no insult to those who prefer to take this shortcut to investing. It’s more likely that those who prefer this simplified approach are simply too busy to take more time with their investments. Or they might prefer to be having a massage. Whatever.
Most variations of this portfolio have three funds: a total market index fund, a total international index fund, and a total bond index fund or a treasury-bond index fund. I’ve also included a slightly less lazy version of this portfolio, based on portfolios followed by a number of institutional investors, including Ivy League universities. This one is a six-fund portfolio that gives you exposure to the key indexes in the world and U.S. markets. It includes exposure to U.S. Treasury as well as corporate bonds.
I’ve also included on my site a bargain-basement version of these portfolios, which you can create using ETFs, the relatively new exchange-traded funds that track indexes, sectors, etc. You can buy an ETF for as little as the cost of a single share, though obviously, that would be a little silly, given your transaction fee. You can purchase ETFs the same way you do stocks.
Okay, so if you don’t have the time or inclination (or the cash) for even a lazy woman’s portfolio, there’s another safe, easy alternative that allows you to get started with a minimum of $100. This is a fund called the Permanent Portfolio Fund, which has a safe, proven mix of treasury bonds, gold, Swiss francs and stocks. The ticker symbol is PRPFX, for those who purchase their stocks and funds themselves on an online brokerage. If you go to the company directly, you can open an account with $100 if you set up an automatic investment with them for another $100 every month. Otherwise, the minimum is $1000, and there are no upfront fees.
The Other Great Secret of Lazy/Busy Investors
And that brings up the other great secret of lazy/busy/safe investing: dollar-cost averaging. Many mutual-fund companies will allow you to add monthly additions to your funds with as small an amount as $50. You can arrange for your monthly contribution to be automatically drawn from your bank account, so you won’t notice the pain.
This is particularly important for investors like Micki who don’t want to buy into the market when prices are high. The great advantage of buying in regular small amounts, through thick and thin, is that you’re buying when the price is down as well as up. You won’t be driven by emotion, and your portfolio will continue to grow. Those of you who have gardens know about the value of patience. It may take years for your planned garden to fill out and become lush and green. But it's worth waiting for.
