I've got a new plan for investing my money

Craig Guillot

I'm done with individual stocks.

After almost a decade of holding most of my retirement investments in shares of individual companies, I've called it quits and moved into one single target date fund.

I did the best I could. I used dollar-cost averaging and built a well-diversified portfolio typically consisting of six to eight stocks from different sectors.

I bought and sold a few positions over the years, reinvested dividends, even made a few short-term trades.

I watched CNBC, read plenty of books and developed my own strategy for investing.

It was fun. I had some big wins and some big losses, but for the most part, it paid off.

It definitely turned me into a consistent, determined saver.

But holding individual stocks entailed an astonishing amount of work that left me questioning the point of it all.

Chances are I could have earned the same yield, if not a better one, in a target date fund.

I came to the conclusion that there was simply no reason to expend the effort, and endure the stress, required to manage my own custom-made portfolio.

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So over the past 18 months, I sold off all of my individual stocks and moved roughly 90% of my retirement funds into the Vanguard Target Retirement 2040 fund (VFORX).

It holds roughly 63% of its assets in domestic stocks, 27% in international stocks and the remaining 10% in bonds.

The asset allocation glide path will grow with me over the years and readjust so that as I get older, I'll hold less in stocks and more in bonds.

It's a one-stop solution with a decent 1.74% yield and a low expense ratio of only 0.18%.

It has been pretty good to me in the past year. Most importantly, it has been easy.

I don't need to do anything. I don't want to spend my free time watching my investments anymore.

I know there will be more ups and downs along the way.

But to me it's no longer worth the risk, hassle and effort to try to outperform, or even match, the market on my own.

Most mutual fund managers with decades of experience can't even beat the market. So it's kind of foolish to think I can, no matter how much time and effort I put into my investments.

I need to be realistic.

I've learned an awful lot more about investing in the past decade.

And the more I wrote about personal finance, the more advisers and professionals I spoke to, the more it all kept pointing in the same direction.

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Of the hundreds of financial professionals I've interviewed over the years, an overwhelming majority had the same advice for middle-class regular Joes and Janes.

It was this: Make regular investments in a low-cost, well-diversified balanced or target date fund.

It may not be the perfect option, but it's the perfect option for me at this moment in time.

I'm a couple of years away from 40 and at this point, a boring but relatively stable and realistic portfolio is just fine.

I imagine that many investors come to this at some point in their life. It's sort of a financial maturity.

In the year 2040, I'll be 63 years old, and if things go as planned, it might be near time to retire.

Even if I'm not in full retirement, I'll at least be able to scale back to a semi-retirement with a little part-time income.

I may not reach the goal, but I'm pretty confident I'll get close enough to it. And with my dedication to saving and a target date fund, I feel I'll be able to do that with minimal effort.

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