Put Your Money to Work
The Gone Fishin' Portfolio is designed for investors who want a powerful and sophisticated system for managing their money but prefer to dedicate their time and energy to the things they value most, whether that's growing prize tomatoes, playing Pebble Beach or reeling in marlin off Costa Rica's Pacific coast.
In his book, Alexander Green describes exactly how to put your long-term capital to work – and what you need to do to keep your investments on track year after year. Advice this specific is virtually unheard of in the world of investment books.
Ordinarily, authors describe general principles and techniques – which may or may not be sound – and then leave the reader to apply them. You're left to survey the investment landscape and make the right decisions. But since there are no specific instructions, most folks do little or nothing.
But The Gone Fishin' Portfolio is different. It's not a smorgasbord of choices. Instead, it's dead simple. In the book, Alex presents a single portfolio designed to meet your long-term investment goals. Buying the exact recommendations found in the book is liberating. It means you're finally handling your serious money in a highly effective way.
And if you have the discipline to stick to it, you will reach your long-term investment goals while outperforming the vast majority of professional money managers along the way.
The Importance of Asset Allocation
Investors are often surprised to learn that their most important investment decision is selecting the mix of assets to be held in the portfolio, not selecting the individual investments themselves. This is asset allocation. It's how you divide your portfolio among different uncorrelated assets like stocks and bonds.
Stocks give the greatest return over the long haul. But the trade-off is high volatility. The Gone Fishin' Portfolio's asset allocation model, however, is specifically built to match or exceed the return of being fully invested in stocks without enduring the hair-raising volatility of a 100% stock portfolio.
The Gone Fishin' Portfolio is made up of 10 asset classes, designed to be both aggressive enough to boost your long-term returns and uncorrelated enough (to the broad market) to smooth out the inevitable bumps along the way.
In the 18 years since its inception, it has done just that, returning 10% a year while experiencing less volatility than the S&P 500.
The Four Biggest Pitfalls
When it comes to managing your money, there are plenty of potential pitfalls out there. However, investors who wind up in retirement with less money than they need have generally fallen prey to four basic mistakes:
No. 1: Being too conservative. Investors who put their money to work exclusively in money markets, certificates of deposit and tax-free bonds generally think they're being careful and sensible. But, unless they're already independently wealthy, they're not.
"The desire for safety stands against every great and noble enterprise."
– Tacitus, Roman historian
The Gone Fishin' Response: Invest too conservatively and you risk outliving your money, especially given today's life expectancies. Shortfall risk – the likelihood that you'll outlive your savings – is the biggest financial risk you face. No one wants to handle retirement assets foolishly, yet being ultraconservative can be just that. The Gone Fishin' Portfolio’s different asset classes are each likely to outperform cash investments over time.
No. 2: Being too aggressive. There are two reasons investors generally get too aggressive with their assets. One is that they're overconfident in their abilities or the abilities of their financial advisor. The other is that they realize they've fallen behind and are going super-aggressive with their investments to make up for lost time.
The Gone Fishin' Response: If you haven’t saved enough, it’s extremely unlikely that your salvation will come in the form of options, futures, day trading or margin accounts. Instead, investors need to spend less, save more and use a proven approach to grow their assets.
No. 3: Trying – and failing – to time the market. It seems so easy when you imagine it: You’ll be in the market for most of the run-up and out of the market for most of the sell-off – then back in again for the next rally. Except it doesn’t work that way. Market timers invariably find that they’re out during some of the good times and in during some of the bad times. The end result is high turnover (which leads to high costs), plenty of capital gains taxes and substandard performance.
The Gone Fishin' Response: Yes, there are times when the market as a whole looks incredibly cheap. And there are times when the market appears awfully expensive. But the key to making money in the market is time, not timing. However, there is a good living to be made offering market timing advice. So it shouldn't surprise you that "professional" market commentators don't see things the same way.
No. 4: Unwise delegation. Delegators are investors who – fearful of being too conservative or too aggressive and rightly convinced they can’t time the market – turn everything over to an insurance agent, planner or full-service broker.
The Gone Fishin’ Response: Brokers sell “financial products” or trade for commissions or wrap fees. Insurance agents sell some of the highest-cost products in the financial industry. And, over the course of several years, even financial planners can convert a substantial portion of your assets into their assets. Fortunately, the Gone Fishin’ Portfolio – which you can easily implement on your own – sidesteps the unwise delegation pitfall altogether.
The Gone Fishin' Portfolio is an antidote to all the noise and confusion in financial markets. It is the distillation of much of what Alex has learned over more than three decades as a research analyst, investment advisor, portfolio manager and financial writer. It is the key to financial freedom because it forces discipline and eliminates these four investment pitfalls.