My Conservative Investment Strategy and How It's Paid Off

I've always been reasonably conservative when it comes to my money and investment strategies. I see nothing wrong with pulling in a secure three or four percent return on my investments as opposed to suffering the pangs of anxiety that come with riskier portfolios and larger returns -- or larger loses.

I constantly hear the financial pundits ridicule my type of strategy, suggesting it won't provide enough retirement income or just won't give me enough of an edge over inflation to make my strategy effective over the course of time. In this brief article however, I will outline my general investment strategy, how it has worked for me, and what I like about it most.

Government Savings Bonds

I love bonds; especially US Series-I government savings bonds that protect against inflation. A decent portion of my investment portfolio is geared toward bonds, both US government as well as a bond fund in my IRA. While they aren't earning me returns of 10% a year, they do generally beat inflation and provide a safe, secure investment option and one (US government savings bonds) that is backed by the US government.

Cash

Many people don't consider what would happen if they were forced to go without the benefits of computers for a few days, a week, or longer. It would mean no online bill pay, no credit cards, and no ATMs. You would need cold, hard, cash to buy things like groceries, gasoline, and other necessities. But this isn't the only reason I like cash. I simply like the security it provides, and right now there's not much of a reason not to leave some of my assets in cash. With interest rates on CDs exceedingly low, having a cash reserve for emergencies or to invest where I see fit should an opportunity present itself can provide nice piece of mind.

IRA

The only reason I have an IRA is because I rolled my 401K into it when I stopped working for my previous employer. I liked my initial 401K option since my contributions were pre-tax and my employer contributed a certain amount of matching funds based upon my contribution percentage. If it wasn't for these beneficial aspects of the plan, I would probably have stayed away from such an option. My family has never had great luck with stocks and I'm not a big gambler. I like having control over my money and being able to get to it when I want it. I keep most of my modest IRA in a bond based income fund, which provides decent, stable, and regular returns.

Lower Expenses

Probably the most important aspect of my investment strategy involves limiting my expenses. This might seem a strange aspect to any investing strategy, but consider this example:

Someone makes $90,000 a year after taxes but spends every dime versus someone who makes $30,000 a year after taxes but spends only $20,000.

In this scenario, the person making less money is actually netting $10,000 to save and invest as desired. Due to their lower living expenses, they are in actuality doing better saving money than the person making three times as much as them.

This of course isn't to say that the quality of life of the person making significantly more in income isn't better, but it really depends upon the wants, needs, and living requirements of the individual. Someone who enjoys cooking at home, hiking, camping, canoeing, and other low expense type activities could be much happier on a smaller income than someone who needs expensive dinners out, must drive a fancy car, and desires an extravagant home in which to live.

A Good Night's Sleep and the Opportunity to do What I Want

So call me conservative in my investment strategy and options. That's fine with me. I found that when I was more heavily invested in the stock market, I watched the markets constantly, I worried about what my portfolio was doing, and I angered easily when the markets were down and I lost money. Now I sleep much easier knowing that a large portion of my investments are secure and not prone to steep declines due to things outside of my control.

I have also discovered that by keeping a small, yet steady stream of investment income coming in, and my expenses super low, I am more able to do as I please. I certainly make less money than when I was working full-time for a large corporation, but now I work for myself from home, I care for my 4-year-old son, and more or less choose the schedule I desire. I am less encumbered by the requirements of a 9-5 job and enjoy being the master of my own time. This is why I find that my conservative strategy works for me.

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Disclaimer:

The author is not a licensed financial professional. The information provided in this article is for informational purposes only and does not constitute legal or financial advice. For financial advice, readers should consult a licensed financial advisor. Any action taken by the reader due to the information provided in this article is at the reader's discretion.