Conservative Investing

old couple


Being a conservative investor

I have owned a number of mutual funds since I opened my Fidelity brokerage account near the end of March 2020.

I started investing at the beginning of April 2020, right when the markets started reversing.  I was not trying to time the market, but, I could not have timed the market hitting bottom any better if I tried.

You don’t have to, and should not attempt to time the market. The best way to invest money, in my own opinion is to do what is called dollar cost averaging.

Rather than investing all of your money at once, you simply invest money on a regular basis.  Invest $X every week, month or quarter.

Some of the time you will buy when the market is high and sometimes you will buy when it is low.

Investing on a regular basis will average out your investments.  For example, if you were to invest when a stock or a fund was priced at $20, $18, $19, and $21 your average cost would be $19.50.  $78 divided by 4.

In mid 2020, I owned eight Fidelity no-load mutual funds.

These funds owned a lot of technology stocks.  In case you don’t know this, technology stocks can move very quickly in either direction.

Tesla stock (Symbol: TSLA) is a great example of a technology stock that is going up like a rocket.  This is not a buy recommendation for Tesla.

Almost every day, for several months, all or most of my funds were growing in value.  During the first half of 2020, there were very few days where I saw any of my funds decline in value.

In fact, I could probably count them on one or two hands.  This is not normal.

I don’t remember the exact date I started seeing some or all of my funds drop in value.

But, even when they did decline it was only a small amount and only for a day or several days.  Then these funds would continue rising in value.

However, somewhere around July or August 2020 I began seeing more days where some or all of the funds declined in value.

That was about the time I decided it was time to become more conservative.

Making the change from being an aggressive investor to conservative investor

A major factor in my decision to all of a sudden become conservative was the pandemic.

Unemployment went from being very low to being very high almost overnight.  Many businesses were closed or had limited hours.

I had no idea if things would get worse, stay about the same or improve so I decided to make some changes in my funds.

Would I have been better off keeping the eight funds I owned?  Possibly.  Maybe one or two of them would not have performed very well.

I think I would have been happy with most of those eight funds if I held onto all of them over a long period of time.

Had it not be for the pandemic I think I would still be an aggressive investor.  Or maybe, somewhere in between aggressive and conservative.

Since I am older, time is not on my side.  Now, I and seeking less risk.

Rather than risk the market declining for a long period of time I decided to try and reduce my investment risks and make some changes.

I traded a number of the funds I owned in for conservative funds.  By traded I mean I sold one, or several funds, and immediately bought another.

After making all of these adjustments I now own just four mutual funds rather than eight.

Since these four funds are not so heavily invested in technology stocks I consider them to be less risk and more conservative investments.

One of the funds I own makes up 83% of the four funds value and the other three funds make up 9%, 4% and 4%.

It took a while for me to get to this fund allocation, and I am happy with it.

Another fund I own and like very much is a fund that only invests in companies that are located outside of the United States.  This funds makes up 4% of my fund portfolio.

Since I don’t believe in placing all of your eggs in one basket, I think you should own several funds.  Probably no more than five.  Right now I only own four funds.  With these four funds I am pretty well diversified.

I believe you can be very well diversified by owning three to five no-load mutual funds.

I talk about how to go from being a younger investor and as time goes by going into more conservative funds in a new blog post.  The name of this new blog post is – What is the best way for a beginner investor to invest in the stock market?  Check it out.

Happy investing.

Jim Juris Signature

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