What I’ve done right with my portfolio

Christine Benz of Morningstar

There are definitely things I get wrong in my investment portfolio.

I hold too much company stock and cash, and I don’t have the recommended allowance of bonds for a person my age. My record on curbing taxes hasn’t been perfect. I’ve held tax-inefficient funds in a taxable account and have been slow to move money into IRAs each year.

But despite these missteps, my husband and I have managed to do just fine from a big-picture standpoint. Here’s what has worked for us.

We maintained a high savings rate

Luck played a starring role in our ability to save: My husband and I had the good fortune of emerging from college debt-free, which enabled us to buy a house and start saving for retirement early in our careers.

We’ve also both been employed for three-plus decades, meaning that we’ve been able to sock away a good share of our incomes and benefit from employer-matching contributions, tax-deferred growth, and a long runway of investment compounding. We don’t have a budget, but automating our investment contributions has helped us be disciplined about saving.

That’s not to say we haven’t made sacrifices. We spent many a weekend working on our old house when we were just starting out, and I’ve always driven my husband’s hand-me-down cars. The home renovations were fun and I’m not into cars, so it’s a stretch to call either of those things a big sacrifice.

Stocks delivered

We’ve also lucked out in terms of market performance. There have been some bad spots, but over our 35-year investing horizon thus far, stocks have returned about 11% on an annualized basis. That’s a fabulous rate of return by any measure.

Of course, stock market returns over any specific time horizon are mainly luck of the draw, but I’m giving us a few skill points here, because we haven’t pulled back from stocks during times of market duress. We’ve kept investing and even added extra to them, above and beyond our automatic contributions, when we’ve had extra cash on hand.

It has helped that we’re too busy to think much about our investments, and we understand that stocks invariably shake off their periodic swoons.

We curbed investment costs

Limiting investment costs has been another important tailwind, one that enabled us to receive our fair share of the market’s returns.

I quickly got religion on the importance of limiting costs early in my career. And as an analyst, I learned that expense ratios were much more predictive of a fund’s future prospects than its past returns. My employer’s 401(k) investment menu skews toward low-cost investments, and my husband and I gravitated to cheap funds for the rest of our portfolio.

We kept it ‘basic’

My preferences in the realm of investing products are definitely basic.

We dabbled in individual stocks in the late 1990s when everyone seemed to be opening a brokerage account. But our portfolio was always largely anchored in core stock funds.