Denton County Living Well Magazine May/June 2020 | Page 41

super-hot, new-fangled funds like cy-
bersecurity, biotech, cloud computing,
and emerging China. There may also
be a few individual stocks in industries
where no niche fund exists yet. These
are investments that make us OOH
and AAH! versified mix of large-cap stocks that
are typically divided among U.S.
and international companies, and
an assortment of investment-grade
bonds spread across treasuries, in-
vestment-grade debt, and perhaps
some mortgage exposure.
Next is the icing. Here we find a
complex swirl of quantitative funds
designed to capture style premiums
like small-cap, value, momentum,
and other sophisticated strategies.
We may also find emerging mar-
ket debt funds and bank loan funds
mixed into the frosting. This is com-
plex stuff. Don’t try it at home. Here’s the secret that no highly paid
adviser wants you to know. The cost
to invest in a basic portfolio––the cake
itself––is ridiculously cheap, and you
don’t need an adviser to do it. You
can invest in a balanced index fund
such as the Vanguard Balanced Index
(Symbol: VBINX) or iShares Core Bal-
anced ETF Portfolio (Symbol: XBAL)
that have fees less than 0.20 percent
per year. Vanguard also has a series
of Life-Strategy index funds where you
can pick your mix between stocks and
bonds. These funds are well-managed,
Now let’s dig into the cake itself.
This is the bulk of the portfolio and
its function is to keep up with the
returns of the markets. There’s a di-
affordable, and don’t require ongoing
maintenance by you or a paid adviser.
Advisers claim their special recipes
are better than balanced index funds,
but there’s no academic evidence sup-
porting that claim. After paying higher
fees for a highly decorated complex
portfolio, the results are almost always
below a balanced index fund.
Having an esthetically pleasing birthday
cake is important for a once-a-year birth-
day ritual, but it’s not worth paying high
fees for investment decorations that don’t
result in extra gains. Being a successful
investor isn’t about bright candles and
being mesmerized by artful decoration,
it’s about being smart. Learn about low-
cost index funds and balanced index
funds and invest in them, and then you’ll
be able to afford the biggest and fanci-
est birthday cake you can imagine.
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