However, those investors who wind up in retirement with less money than they need have generally fallen prey to one of four basic mistakes:
1 They were too conservative, so their portfolio didn't grow enough to begin generating the income required to meet their spending requirements.
2 They were too aggressive, so a significant percentage of their portfolio went up in flames along the way.
3 They tried—and failed—to time the market. Confident that they would be in for market rallies and out for market corrections, they ended up doing just the opposite much of the time.
4 They delegated unwisely. They turned their financial affairs over to a broker, insurance agent or financial planner who—over time—converted a substantial amount of their assets into the firm's assets. In addition, the advisor may have been too conservative, been too aggressive, or tried and failed to time the market.
If your nest egg is lying in pieces late in life, you don't have the opportunity—or the time—to build another one. The consequences, both personal and financial, can be devastating.
Planning your financial future is a momentous responsibility. The Gone Fishin’ Portfolio will enable you to handle your serious money—the money you need to live on in retirement—in a serious way.
There are few guarantees in the world of investing. In fact, once you get beyond the risk-free world of Treasurys and certificates of deposit, there are virtually none. However, the Gone Fishin’ Portfolio eliminates six major investment risks:
1 It keeps you from being so conservative that your long-term purchasing power fails to keep up with inflation.
2 It prevents you from handling your money recklessly.
3 It does not require you to own any individual stocks or bonds. So a single security—think Enron or Shearson Lehman—cannot cause your portfolio to crater.
4 It does not require a broker, financial consultant or anyone else to attach himself to your portfolio like a barnacle, siphoning off fees every year.
5 It doesn't require you—or any investment “expert”—to forecast the economy, predict the market or analyze competing economic theories about the future.
6 Perhaps most importantly, it guarantees that your time will be your own. Rather than spending countless hours evaluating stocks, market trends or fund managers, you'll spend your time as you please. While others struggle to manage their money effectively, you'll have “gone fishin’.”
This last point means that instead of spending countless hours fretting over your investment portfolio, you'll be able to relax … play golf … travel the world … spend more time with your kids or grandkids … or just swing on a hammock in the shade with a glass of ice-cold lemonade. Because your investments will be on autopilot.
This is not just a strategy for today's markets, incidentally. The Gone Fishin’ Portfolio is designed to prosper—and generate peace of mind—through all market environments. And I invite you to be skeptical. In fact, let me begin by asking you a question.
If I could show you a way to manage your money yourself, using a strategy that is as powerful and effective as any used by the nation's top institutions, that will allow you to outperform the vast majority of investment professionals, pay nothing in sales charges, brokerage fees or commissions, that will take less than 20 minutes a year to implement, and that is based on an investment strategy so sophisticated it won the Nobel Prize in economics, would you be interested?
I hope so. That, in a nutshell, is the Gone Fishin’ Portfolio. It's about handling the money you intend to retire on simply, effectively and cost-efficiently, with the absolute minimum of time and attention.
If you're like most people I know, you have better things to do than watch your stocks bounce up and down all day.
Don't get me wrong. I'm not averse to trading stocks. (Long-term investing and short-term trading are not mutually exclusive activities.) But short-term trading strategies are beyond the scope of this book. Instead of focusing on trading or speculating, we're going to focus here on the money you intend to retire on—and perhaps ultimately leave to your kids, your grandkids or your favorite charity. This is money that shouldn't be treated like chips in a poker game.
Reaching financial independence is a serious goal, one that should be pursued in a disciplined, rigorous way.
That's why I recommend that you make the Gone Fishin’ Portfolio the foundation of your long-term investment program. The philosophy behind it is based on the best investment thinking available. It has been tested in various economic conditions. It can increase your returns while reducing risk. And it will minimize your investment costs and annual taxes on your portfolio.
Best of all, it works. Investors who have put their money to work this way have enjoyed years of excellent returns while taking less risk than being fully invested in stocks.
I invite you to join them.
CHAPTER 1 The Unvarnished Truth About Your Money
I offer nothing more than simple facts, plain arguments, and common sense.
Source: Common Sense, Thomas Paine
A while back, some friends and I were vacationing in Key West and decided to do some deep-sea fishing.
We didn't have a boat, so we went to a local marina to see what we could charter. There were several boats available, so we began talking to various captains.
Most assured us that the fishing was excellent and encouraged us to hire them for the next day, before someone else booked them. But since we were in no hurry, we took our time and kept wandering down the dock chatting with the crews of different charters.
Near the end of the dock, we saw an older captain leaning back comfortably in his captain's chair with a beer in one hand and a cigar in the other.
“How's the fishin’ been lately?” I asked.
“The fishin's been great,” he said. “But the catchin’,” he added with a shake of his head, “the catchin’ ain't been so good.”
“Why not?” we asked, a little surprised given the positive spin we had gotten from the other boat captains.
He said the weather had been unseasonably cool. That had affected migration patterns. The big schools of fish hadn't shown up yet. “Nobody's been catchin’ much lately,” he said.
We looked at each other in disappointment.
“It's still great weather to go out,” he added. “And the fish might show up,” he said after a long puff on his cigar. “You never know.”
The prospect of spending the afternoon on the water without catching anything more than a bout of seasickness wasn't terribly appealing. So we huddled to talk about what we wanted to do. After a little discussion, we decided we were willing to risk going out. We also agreed we wanted to use the old boat captain.
Unlike the others, he hadn't blown any smoke up our skirts. He wasn't interested in talking us into a fishing trip. He didn't seem to particularly care whether we hired him or not. As a result, he did something nobody else did. He told us the truth. So we hired him.
We knew we were running the risk of paying to sit on the water all day without so much as a nibble. We could live with that. And, if we didn't catch anything, well, at least we went out with our eyes wide open.
The next day the weather was perfect. Despite his laid-back attitude, the captain and his mate were good company and gave first-rate service. And the “catchin’”? It was the best fishing I'd ever experienced—then or since.
A few hours after he got us out to his “spot,” the ocean suddenly filled with so many dolphin—mahi—that the water turned yellow.
After