I can’t be accused of being impulsive when it comes to investing. It took me about 7 years to slowly shift from stock picking to just this week fully embracing index investing. We’ve finally sold off the last of our Berkshire-Hathaway stock.
We held on to the last shares for tax reasons, but we’ve finally now realized the last of my wife’s capital gain on Berkshire. Our portfolio now looks as I described it a couple of years ago.
We now own only 4 different ETFs, and I have a spreadsheet that alerts me if I ever need to rebalance or invest new money. It feels good to have a simple plan that eliminates almost all aspects of my own day-to-day decision-making. I still have to make some final decision about investing during retirement, but that’s a long, slow process.
The total costs for my portfolio come to a little less than 0.2% per year. This includes ETF MERs, ETF internal trading costs, trading commissions, bid-ask spreads on trades, and foreign withholding taxes. Over the next 40 years, this compounds out to 7.7%. If this sounds high to you, typical costs are far worse. Paying 2.5% for 40 years compounds to over 63%. This consumes nearly two-thirds of each dollar that stays in your portfolio that long!
One nice side effect of this approach to investing is the sense of calm I feel when an article or talking head tells me that the market is about to crash or that I’m missing out on some great stocks. Deciding in advance to do nothing in the face of this “news” has improved my life.