How to Add 50 Percent To Your Investment Portfolio
November 28, 2011

How to Add 50 Percent To Your Investment Portfolio

How to Add 50 Percent To Your Investment Portfolio

Can a 40-year-old run a four minute mile on a diet of Mars bars and Cheetos?  It’s about as likely as building a portfolio of actively managed mutual funds and (over a lifetime) expecting it to keep pace with a portfolio of index funds, after all taxes and expenses. 

If you’re already on track, however, with an efficient portfolio of indexes, how can you juice your investment account even further?  Coupling your portfolio with highly touted hedge funds or gambling with puts and options could act as a short term investment steroid (if you’re lucky) but like disgraced sprinter Marion Jones and others who were caught, such shortcuts bring short term glory and long term pain.

Fortunately, there’s a far easier way to increase the size of your eventual retirement account without increasing your risks.  Invest more money.

Before dismissing the idea and dumping me for an article about Brad and Angelina sharing a picnic with Jennifer Aniston, hear me out a moment longer.   I’d be willing to bet that most people can increase the size of their investment portfolios by an additional 20 to-50 percent with less than a one minute commitment per day.

Here’s how.  The next time you fill your gas tank, stuff the receipt in your wallet.  You grabbed a Hershey bar while lining up to pay?  No problem.  As long as you didn’t steal it, the chocolate bar will show up on the receipt.

Continue collecting receipts for the rest of the day. Then spend 60 seconds after dinner and itemize everything you bought.

Do this every day for a couple of months and, if you’re like most people, you’ll recognize how much money you’re squandering. Trust me, it will be a lot. A piece of coffee cake with that afternoon coffee here, an impulsive online movie rental there, and the second glass of wine you didn’t really want to have are regulars for lots of people. For others it can be buying clothes while waiting to meet a friend. For some it can be real vulnerability, like giving in to a timeshare sales blitz (more on that in another column).

You need to act with equal swiftness once you recognize how much money you’re spending on items you could do without (or cut back on). Stare at that itemized pile and repeat the first rule of growing rich: Spend Like You Want to Grow Rich. Then do a few minutes of self-directed positive brainwashing.

Show yourself some glossy photos of palm trees at hedonistic health spas. Imagine family reunions at your future lakeside home, with grandchildren happily laughing.  You’ll start to weaken inside.  Yes, you want these things, you’ll tell yourself.  Yes, you’ll do what it takes to get them.  

Once you’re smiling, and happily moaning “yes, yes” quickly contact your financial institution.  If you’re investing regularly, you should already have a direct deposit automatically going from your savings account to your investment account.  Now increase it, while you’re still in your trance.    Automatic, direct investment transfers from your savings account to your investment account work best, because you don’t tend to see the money exiting your account.  If you’re investing $200 a month, increase it to $250 or $300.  A 25-50 percent increase in what you’re saving today could manifest itself as a 25-50 percent difference in the size of your eventual nest egg. That’s no more than $3.33 a day. Instead of ending up with $800,000, for example, you could end up with 50 percent more (try $1.2 million!) thanks to your immediate action.

Continue to document your spending over the next two months.  Just knowing that you’re accountable for your expenses should constrain you enough to handle the augmented monthly transfer to your investment account without running out of money for your day to day needs.  Without establishing a suffocating budget (like diets, budgets rarely work) you’ll reign yourself in from that extra drink at the bar, the iPhone upgrade, and the twice daily Starbucks direct wire transfer:  from your wallet to (Starbucks founder) Howard Schultz’s.

After all, Howard doesn’t need your money.  But you will.

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This article contains the opinions of the author but not necessarily the opinions of AssetBuilder Inc. The opinion of the author is subject to change without notice. All materials presented are compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. This article is distributed for educational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, product, or service.

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