Lazy investing strategy

Tuesday, December 27, 2016

Lazy investing strategy



“Practice not-doing and everything will fall into place.” – Lao Tzu

The thought or even the belief that laziness is a positive attribute is not shared by many. Fortunately for you, I’m one of those vital few. I’m not sure if this is true but there’s this quote that was allegedly said by Bill Gates that states: “Hire a lazy person to do a difficult job because a lazy person will find an easy way to do it.

Lazy in this aspect means that you don’t have to work too hard, (as already mentioned above) which often leads to figuring out how to do less work or finding the best and shortest possible ways to complete a task.

Of course there has to be a balance to this. Too much of anything makes it a bad or negative habit/s.

Why lazy investing?
Fees are every investor’s worst enemy, but they tend to have a disproportionately negative impact on people with less money to invest. We cannot control where the market goes, but we can control how much we end up paying. As more of your money is paid to fees, the less money you have invested, which results in lower returns. Little things add up, all the more when compounded for both investments and fees.

Laziness in this case pays off because of diversification. Diversifying your portfolio with both fixed-income and equity securities allows an investor to limit losses during periods of bearish equity performance.

The return investors gain is not a result of taking big risks. For the most part, this strategy offers sound gains while allowing investors to sleep soundly each night.

The lazy investor seeks the methods where a little action can change everything, or even can go a long way!

Couch potato portfolio
Lazy Investing is basically fully utilizing “Passive investing”, which means you are buying an index fund. It doesn't require a lot of time to set up, and it is usually the least expensive option.

A lazy portfolio is a collection of investments that requires very little maintenance. Lazy portfolios best suited for long-term investors with time horizons of more than 10 years. This strategy works well for most investors because it reduces the chances of making poor decisions based upon self-defeating emotions, such as fear, greed and complacency, in response to unexpected, short-term market fluctuations.

In the Philippines, you can search through the various pooled fund providers (from Mutual Fund companies, to UITFs of Banks) and find a simple, well-diversified portfolio of just three-to-eleven funds, low-cost (check expense ratio), no-load index funds that will create a long-term winner (check fund manager and performance) through bull and bear markets.

Also, know that despite all the problems and pressures in your life right now, you still have the option to invest without exerting too much effort on your end. Believe that it is possible to invest while still be able to do whatever you want to do (Business, Career, Travel..etc..).

Is the Lazy Investing Strategy for you? It really depends and boils down to your goals in life and the amount of effort or energy you want to spend in investing.

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The writer is an RFP® - registered financial planner of RFP PH, Licensed Real Estate Broker and Director of CERTA, Inc., a family estate planning and investment advisory firm. To know more, please visit www.certa.ph
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Originally Published in Philstar - The Freeman Newspaper last November 29, 2016.
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