Don’t Touch That

I’ve recently had a revelation. It started with my quest to make the perfect pizza dough. Then I realized, looking back, some of my more successful efforts were the result of the same idea. Things turn out better if I leave them alone.

It took many attempts to make pizza dough from scratch. The first several batches could be considered weapons. They were so hard, their only possible use was to hurt someone. I tried the cold rise, the warm rise, the overnight in the fridge rise. Finally I just used my bread maker. Low and behold, the dough was perfect. All it took was me not touching it. Apparently I had been overworking the dough.

I make a mean Thanksgiving turkey too. The secret of my success? I leave it alone. I don’t baste it. I put it in the oven, and only open the door to take the foil cover off so it can brown. The bird is juicy and perfectly done in less time. That is because I’m not constantly letting all the heat out of the oven.

I have to say my investment strategy is and always has run along the same lines. I generally leave my investments alone. Since I started saving for retirement, right out of college, the bulk of my money was invested in a single mutual fund, the Vanguard Life Strategy Growth fund. Target date funds didn’t exist at the time, or I probably would have started with one of those.

Since we were saving for an early retirement, we needed to save outside our retirement plans, so about half of our savings was taxable. As we got older, our investment strategy needed to get more conservative. But I didn’t want to pay capital gains tax on my Life Strategy investment. So I solved the problem by gradually buying bonds and bond exchange traded funds with my savings contributions. No selling, no trading, only buying.

Now that I’m retired, it hasn’t changed much. We still have the Life Strategy Growth fund and the bonds. Each year some of the bonds mature to provide for our spending money during that year. At the beginning of each year, I rebalance between the Life Strategy Growth fund and my bond holdings. And that is the extent of my investment management strategy. Like the pizza and the turkey, the secret to my investment success is leaving my investments alone.

Could I have had better results if I had been more active. It’s not likely. In fact it’s far more likely that my results would have been worse. The average actively managed investment strategy does not produce better results than a buy-and-hold index investment strategy. Though active investment managers will tell you their strategy is the one that does.

If you are wondering how to invest your retirement savings, find a strategy that you don’t have to put much thought into. A target date retirement fund is a perfect solution. You can spend your energy saving for retirement and your investments will do much better if you leave them alone.

Photo by Nadya Spetnitskaya on Unsplash

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4 thoughts on “Don’t Touch That

  1. hey julie, I’m having a hard time choosing between VTSAX vs VASGX vs a target retirement fund, and whether I should go with their admiral shares once I have those funds. Thank you! SESO!

    VTSAX: more aggressive/less diversified, all US
    VASGX: multiple fund diversification, so higher expense ratio

    Fidelity also seems to be very tempting as well – although their ER might be a little higher than stated. Would love to hear your thoughts on this as well!


    • Hi Emily. For your retirement, I would recommend a target retirement fund. That allows you to keep your focus on saving. The target date fund will gradually become more conservative as you approach retirement, so you won’t have the issue that I had, where you need to take steps to bring down your risk. Vanguard’s funds are index funds. Fidelity has both actively managed target date funds as well as index funds in their Freedom series. If you want to work with Fidelity, I would go for the index funds. If you are looking for a stock only investment, Fidelity has a 0% expense ratio fund similar to the total market index.


  2. Long time reader and big fan of your work in and out of finance!
    Emily – target funds hold the Total International Stock Market Index Fund which is great, but some debate as to whether it is needed especially if you want to stick with the Total Stock Market Index Fund. You can also keep your bonds in tax-advantaged accounts to protect from taxes.

    Julie – thoughts on this? curious what your reasoning was for selecting the Life Strategy Growth Fund?
    Now about Fidelity – ignoring the fact that they ran ads to discredit vanguard back when indexing was started and I believe in loyalty, they do offer the zero fee HSA and zero fee fund. Do you think this is a bait and switch type deal?

    Would love to get a conversation going and share this with others!


  3. Hi Leslie, At the time I chose the LS Growth Fund, target date funds were not available, and vanguard was the low fee king. I was young and looking for a well diversified investment and LS Growth fit the bill. If I were 22 today, with a savings to invest, it would go into a target date fund whether it was my 401k, an IRA or taxable savings. That, by the way, is the order to fill up your savings, after your emergency fund.

    Fidelity’s limited set of zero fee funds are designed to get you in the Fidelity door. However I don’t believe they’ll change the expense ratio later. If they did, and you are saving in a tax advantaged account, you could always change investments. They do hope you’ll buy other Fidelity products, and since the range of options is narrow, you likely would at some point.


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