This article is a guest post from Joseph Hogue, CFA.
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Consider using Motif or similar tools to create a stress-free investing strategy around your needs and stop worrying about the stock-market roller coaster.
Julie and I have been taking turns reviewing chapters of The Intelligent Investor on our blogs. It’s been a great journal of advice from Benjamin Graham, one of the most respected investment professionals throughout history.
Julie’s review of chapter four, creating a portfolio policy for the lazy investor, was one of the best. It laid out a starting point for the types of investments and other factors for the person who doesn’t want to spend a lot of time analyzing stocks.
This idea of stress-free investing for the individual investor is one of the best themes in the book. Unfortunately, sometimes it’s a little vague on how you can apply the concepts and create your own portfolio.
For that, I use one of my favorite investing tools to create a simple portfolio and save money investing.
A Recap of the Stress-Free Portfolio
You’ll want to read Julie’s review of the chapter but it revolves around three questions and how they impact the types of investments you might buy.
- What are your long-term portfolio goals? An investor that only needs an annual return of 4% doesn’t necessarily need the higher-risk, higher-return of stocks.
- What is your investing time horizon? If you have less than ten years to retirement, you might not be able to bounce back from a stock market crash. Gradually shift your portfolio to stable assets like bonds and real estate as you age.
- How comfortable are you with risk? If you get nervous with big swings in portfolio value, it’s best to invest more in safer assets.
Use these questions to adjust a 50/50 portfolio of stocks and bonds, the starting point suggested by Benjamin Graham. I would add in real estate investing with REITs here so maybe starting from a hypothetical mix of 50/30/20 in stocks, bonds and real estate.
For example, you might adjust the percentage for bonds and real estate higher if your long-term goals are relatively modest and you don’t want much risk. Conversely, you might hold more in stocks if you have decades left to invest and do not mind a little more risk in your portfolio.
How I put it all together on Motif Investing
I started using Motif Investing earlier this year as a way to save money on investing costs. The online investing site lets you group up to 30 stocks and funds and then buy them all with one trade, potentially saving hundreds in fees compared to investing on another site.
I soon realized that Motif can be used as a resource for finding investment strategies and building a stress-free retirement portfolio as well.
Whenever an investor creates a fund on the site, called a motif, he or she has the option to make it viewable to other investors. There are more than 12,000 of these motifs in 20+ categories that you can sort and see what other investors are buying. To explore this method of investing, go to www.motif.com:
- Hover on What We Offer and click ‘Explore Catalog’ in the top drop-down menu
- Click ‘Browse Catalog' to view offerings among the 20+ categories that include green investing, real estate, retirement, healthcare and many others
- Note that there are Community Motifs created by other investors as well as Professional Motifs created by analysts on the website
- Click through any of the categories to see ideas or motifs to consider for your own portfolio
One of the four motifs I’ve created is my Ready-Made Retirement Fund, a group of seven ETFs and nine stocks that match my needs for diversification and return.
The fund holds two ETFs that invest in different types of bonds, one general bond fund and one for high-yield bonds. It owns another ETF that holds individual REITs for my real estate exposure and four stock ETFs.
Also using Motif Investing tools, I've created a fund based on dividends (Dividend Stocks for Growth and Cash Flow) and one focused on agriculture, healthcare, and energy (American Future Fund).
Besides allowing you to put together a group of funds and stocks that meets your criteria, Motif Investing makes it easy to see the percentage invested in each category or segment. This approach can help you to rebalance your portfolio to your target allocation of stocks and bonds.
Note that the only retirement investing I do outside of Motif is peer loan investing because funds aren’t yet available that include the asset class.
Check out the rest of the chapter reviews on The Intelligent Investor and decide whether you are a defensive investor or want to spend a little more time analyzing investments. If you just want a stress-free option to meet your investing goals, follow these three basic criteria (long-term portfolio goals, investment time horizon, and risk capacity) and consider using Motif Investing to find ideas and save money.
Joseph Hogue, CFA is an investment analyst and blogger. He runs six websites on topics including personal finance, investing, crowdfunding and making money from home. A veteran of the Marine Corps, he holds the Chartered Financial Analyst (CFA) designation and lives with his family in Medellin, Colombia.