It’s been awhile since I’ve taken some time to write, and I have quite a few topics on queue. For now I am going to start with some suggestions for automating your investing.

In a world where everyone is talking about which week…day…hour they bought Gamestop shares or Bitcoin, I think its helpful to step back and talk about how to remove timing from the equation.

Most people I speak with towards the end of their careers tell me their best performing accounts are their 401Ks where they have allocated a portion of their paycheck to a passive equity fund every other week for years and not thought about it. Its not a coincidence. When you try and time things you usually buy at the top, sell when it starts to fall, overpay taxes on your winning positions, and transact in inefficient ways.

I wont claim to be perfect, or even very good, at avoiding this trap. I’ve taken ~5-10% of my non-retirement investments and trade according to my view of what’s going to happen. It’s fun, it keeps me interested in what’s happening in the world, and maybe I’ll get lucky…who knows. (I am currently buying the clean energy dip).

For the rest though, here are my suggestions for how I would think through automating your investing. 2 things you’ll want to do before you can figure that out:

1. Keep some cash: You want to strive to keep 2-3 months of cash in your checking / savings account to pay for expenses (good for emergencies) and every month you should aim to refill this. This requires you to understand what your monthly expenses are. I would recommend creating a monthly expense tracker (post to come on this topic)
2. Pay down debt: High interest rates on accumulated debt are going to have a huge impact in the long term, so focus on this first

After this you’ll have a pretty good idea of how much you have available to invest. In order of priority, here is how I would invest whatever remains:

Retirement savings: First allocate to your retirement accounts and take advantage of the tax benefits

1. 401K: Select a certain portion of your paycheck to be put into your 401K and make sure that it is being automatically invested in a passive fund.
   1. My company uses Vanguard so I have 100% of my allocation in the “Vanguard Institutional Index Fund Institutional Plus Shares”. I have no clue why it has such a long name, but it is essentially the S&P 500 and has a very low expense ratio (0.02%)
2. IRA: I use TD Ameritrade and put money into the S&P 500. I set aside a certain amount each month to put here and invest it immediately up to the $6000 contribution limit

Non-retirement savings:

 This is where you have a bit more flexibility. I would create a recurring monthly contribution to a brokerage (TD Ameritrade, Fidelity, etc.) and have recurring monthly investments set up across several index funds. Here is an example of what your non-retirement savings could look like (just an example):

Recurring monthly contributions on the 29th of each month to your brokerage:

1. 50% in S&P 500 (SPY)
2. 25% in an Emerging markets ETF (IEMG)
3. 25% in one other index fund (Russel 2000, Real estate ETF like VNQ, etc.)
4. I will usually take ~5% out of the above allocation and put it into an industry I really believe will outperform (it is a guess, but one that I enjoy having as a part of my portfolio)

Recurring monthly contribution on the 29th of each month to Fundrise (Crowdfunded real estate platform)

1. 100% in long term growth portfolio

You can also utilize services like Acorns and Betterment to help manage your investments for you at a very low cost. Just make sure you are allocating the right amount each month and still keeping enough behind for your emergency fund.

As you have major expenses come up or your income changes, you can always adjust the quantities.

Let’s talk through some examples (caveat that everyone’s expense profile will look different, especially if you live in an expensive city or have debt payments, so the amount available for investing may vary significantly from the below):

Stay the course and don’t worry about little market fluctuations.

Feel free to reach out if you have any other ideas on automatic investing strategies!

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