“2022 was clearly a bad year for investors overall,” said Jesse Kramer.
Cramer works full time for a registered investment advisory firm and runs a personal finance blog, The Best Interest, on the side. After paying off $42,000 worth of debt, he got serious about investing and built up a six-figure net worth through “lazy investing” while saving for his first home.
Despite market fluctuations over the past two years, “my investment strategy hasn't changed,” Kramer told Insider. “The biggest reason is that my main financial goal hasn't changed. My main goal is to save for both financial independence and retirement.”
He explained that the framework he follows when it comes to investing is “goals, schedule, and asset allocation.” “My goals haven't changed, so my timeline hasn't changed either. I'm still thinking decades ahead. And my timeline hasn't changed, so my asset allocation… The proportion of stocks, bonds and alternatives hasn’t changed. Wait – that hasn’t changed either.”
If your goals change, that's when you might reconsider your asset allocation, he notes, but a market downturn alone isn't enough to change your strategy.
He reacted to the 2022 recession with the same indifference he did to the 2020 stock market crash.
“I knew very well how a market downturn could happen,” he said of the 2020 crash. “We knew it was a possibility, but we also knew it was a little overdue.” Ta. “So when it happened, I didn't have much of an emotional reaction. I just sat there and watched it like a science experiment unfolding in front of me.”
Build wealth the “lazy way”
Mr. Kramer's investment strategy is simple. “Own several funds, keep costs low, stay diversified, and then rebalance regularly,” he says.
He even calls it “lazy.”
Anyone can replicate his strategy by buying and holding a few low-cost, diversified funds, such as a broad U.S. stock index fund and a broad international stock index fund, he said. These two funds give me all the equity exposure I need, and maybe two bond funds and one alternative asset fund.
“The idea is that you don't want to hold 27 different ticker symbols in your portfolio in varying proportions to make up 100%. Rather, you only want to hold something that's manageable, like three or five. is.”
Kramer graduated with $18,000 worth of student loans.
jesse kramer
When it comes to specific funds to add to your portfolio, Kramer said you can't go wrong with a general stock market index fund such as VTFAX, FSKAX or SWTSX. These are the Vanguard, Fidelity, and Schwab general stock market index funds.
“It makes no difference which one you own,” he said. “Those are the big three. In my opinion, they're all great.”
Obsessing over small differences “just puts problems in investors' minds that are not worth pursuing,” he added.
Another element of a lazy investment strategy is periodic rebalancing. Kramer rebalances two to four times a year, he said. “Let's say my target allocation is 70% stocks, 20% bonds, and 10% alternatives, and depending on market performance over the past six months, my asset percentages are a little different. Then I sell a little bit here. , so I buy a little bit and put it back to 70-20-10.”
He prefers to rebalance at the same time every year. That way, he said, it would be “rules-based” rather than dictated by the market.
“It should be very mechanical,” he advised. “Set a reminder on your calendar, whether it's once or twice a year. Maybe no more than four times a year, because that makes 'lazy investing' a little too practical.”
Own one individual stock: Berkshire Hathaway
Although Kramer doesn't believe in picking individual stocks, he does own a stock called Berkshire Hathaway.
“I'm not afraid to say that my ownership of Berkshire Hathaway is rooted in irrational decisions.'' “It's the fact that I think it's fun to own a company that I run,” he said. “It's really simple. It's not a fundamental decision based on rigorous stock price analysis.”
All investments involve some degree of risk, but betting on a single stock is inherently riskier than owning a mutual fund that bundles many stocks into one investment.
“I'm lucky that Berkshire Hathaway's ownership has worked out in my favor, meaning that since I bought Berkshire Hathaway, Hathaway has consistently outperformed the rest of the U.S. stock market. '' he said. But “that's just bad luck.”
The fact that the company is doing well is a bonus. He didn't buy it to make money, saying, “It's like buying a designer handbag or an autographed rookie baseball card. “It's for the pleasure, not because it's financially responsible.” do.
“Even if I lost 20% of my money on an investment, I would still enjoy owning it.”
