How I invest my own money.
Welcome to the sixteenth post of The Invested Counsel—thoughts about financial planning for young lawyers.
With the last post, we’ve completed a very simple course about investing for young lawyers. Here it is, summarized in seven core lessons:
Your long-term money can (and maybe should) be invested long term in a single, globally diversified, total market, low cost, market cap-weighted equity index ETF. See Post 7 (The Sentence).
An example of this investment is the Vanguard Total World Stock ETF, or VT, which owns a little bit of every publicly traded company in the world, in proportion to each company’s size. See Post 8 (VT).
Index funds are good because they grow a lot over the long term. See Post 11 (Double Every Decade).
But one of the major problems with investing in stocks is that stock prices are squiggly—they move up and down quickly and unpredictably. See Post 10 (The stock market is squiggly).
To deal with the squiggliness, you may also want to invest in bonds, which tend to be less squiggly, but also have less potential for growth than stocks. See Post 13 (What is a bond).
And you need cash, which protects you from the squiggliness of the stock market and the uncertainty of life. See Post 14 (Cash makes you bulletproof).
The most important investing decision you will make is how you allocate your assets among the buckets of stocks, bonds, and cash. See Post 15 (Asset Allocation).
But what do you actually do for yourself?
Unsurprisingly, I think that the above is good advice and that most people should follow it. As an example, here is how my family’s money is invested:
Stocks. All of our long-term money is in low-cost index funds which collectively own pretty much every stock in the market.
We own VT, which owns pretty much every U.S. and international public company.
We also own funds that own either all the stocks in the U.S. (FSKAX, FZROX, ITOT, VTI, VTSTX), or all stocks outside of the U.S. (FSPSX, FZILX, IXUS, VXUS, VTISX).
These investments are in various types of accounts, including taxable brokerage accounts, pre-tax retirement accounts (where taxes have not yet been paid), after-tax (Roth) retirement accounts (where taxes have already been paid), health savings accounts, and 529 college savings accounts.
While it may look like a lot of different investments, and there are slight differences, collectively they do exactly what VT does: own virtually every publicly traded stock in the world.
Cash. We hold cash in a checking account, a high-yield savings account, and in various money market investments, including SPAXX, FZDXX, and FDRXX. While there are slight differences among these three funds, in general they can be treated as interchangeable.
Wait, so you’re not invested in . . . ?
All of our investments are listed above. That means we’re not invested in a lot of stuff:
No individual stocks
No mutual funds or ETFs, except the passive, total market index funds mentioned above.
No individual bonds or bond funds
No options, futures, or other derivatives
No commodities
No gold or other precious metals
No collectibles
No personal real estate
No investment real estate (including investment properties or REITs)
No private equity (unless you count ZZ Planning itself)
No hedge funds
No limited partnerships
No venture capital
No investing with margin
No sports betting
No day trading
No prediction markets
No crypto
No art (except the copyright to my wife’s own plays)
No cars
No other alternative assets I can’t think of right now
Why not?
I don’t think I need any of that stuff.
But why don’t you need any of that stuff?
I’ll explain that in the next post.
That’s all for now. Have a wonderful week.
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