In 1992, I published an investment book called Get Rich Slowly that was designed primarily for individual investors. As you will see in a moment, the gist of the book should be very familiar to Diversified Trust clients and friends because the principles underlying its recommendations helped form the investment philosophy that our firm employs. Now that more than twenty-five years have passed, I think it is worthwhile to evaluate the performance of the portfolios that were recommended in the book to see if they behaved as expected. My goal is not to engage in either self-congratulation or flagellation (depending upon the outcome of the study) but to hopefully lend some credence to the investment approach that Diversified Trust and I have advocated over the years.
I will spare you the work of reading 250 pages by summarizing the key points which were as follows:
- Determine your return goals and risk constraints carefully based on overall financial goals, age, income, and other personal circumstances.
- Select a globally diversified asset allocation that seems likely to achieve the target return within the confines of an appropriate risk level. To achieve these goals, the portfolio should contain investments designed to perform well in various economic and market environments.
- Use low cost, passive investment vehicles unless you have confidence in your ability to select and access top flight asset managers.
- Rebalance your portfolio periodically to ensure that the actual portfolio weights conform to your target asset allocation.
- Adjust your goals and resulting asset allocation over time as your financial circumstances change.
- Otherwise, leave your portfolio alone and avoid the temptation to react to market movements and headlines.
Sound familiar? Many of the white papers that I have written elaborate at least to some extent on one of these principles.
To read the findings, as well as some additional investment tenets, please click here.
Spoiler alert: The advice in the book still applies!