Post #137 - Embrace the Boredom of Index Investing

Part 6: Let’s emphasize the important stuff (cont.)

When I start telling people about my investment strategy, they generally fall asleep.  So if you are planning to have sex with your significant other, refrain from any discussions about passive index investing a full eight hours beforehand.  Alternatively, if your life partner starts licking your earlobes and you are just not in the mood, tell him a story about asset allocations and you’ll be able to finish your book without interruption.

Also, don’t talk about low cost index funds when you are a passenger in a car.  The driver will keel over with boredom in less than 20 miles and the next thing you know you’ll be in a Medevac chopper heading to the nearest trauma unit.

It’s important for you to understand that my way of investing is boring.  It doesn’t take a lot of time, effort or brains to invest via my recommendations.  It does require dedication, a strong stomach (for those times when the market gets crazy) and mental toughness to stay the course and not be swayed by the lies of the financial spin doctors.

If you absolutely need more excitement in your portfolio, use 5% of the portfolio as Mad Money.  The worst that will happen is that you will blow 5%.  The best that will happen is you will have exciting stories to tell.  When you are at the golf club you can tell your buddies of your daily skirmishes with the spot oil market.  While you are sipping the latest “Pinot Hudson River” at your wine group meeting, you can let it slip that you’ve been trading gold futures.  Pretend there is a lot of money at stake rather than just 5%.  The stories will be just as good.  Of course, nobody will believe you because they know you drive a 20 year old VW bug.  That’s the price you pay for saving 20% of your annual salary.  It’s tough to get people to think you are a big shot.

Once you blow the 5%, do not try it again.  This is a one-time thing.  It’s like when you are at Vegas and your spouse gives you fifty bucks to blow on blackjack (which probably will last for two hands).  Once the money is gone, the well has run dry.  You can’t go back to your spouse and ask for more.  It’s the same with your mad money.  Blow it once and then give up with your crazy investment ideas. 

You can add excitement into your life ways other than investing.  You could be a lion tamer at the circus instead of a mechanical engineer.  Or you could learn to fly a plane upside down.  That sounds real exciting.  Wait, you think that’s too dangerous?  Well, guess what, exciting investments are just as dangerous.  Stay away from them.