The Ignorant Investor

This is the first post I've made in more than a year, and I say that's not a bad thing. Investing for the long term using low cost index funds is a dull, simple strategy that doesn't change much as the months go buy. It doesn't even change as the years go buy. How much needs to be written about it?

In the past year I've finally sold off the last of my individual stocks. I'm all in mutual funds, almost all of which are index based and will never need to be sold. The decisions I need to make in any given year are few: Where do I put new money? Do I feel like cutting back on equities a little? That's about it.

This is a good thing. I'm terrible at major decisions. Indecisive. Playing the markets requires a tremendous number of decisions, a high confidence level, and an obsessive interest in what is moving the markets at any given time. That's not me. I like hanging out with the family, reading history, playing video games, exercise, playing with cameras and goofing off. I follow the markets, but not close enough to pick which ones are about to tank and which are about to take off. I'm done with that. So in the spirit of my newfound financial disconnectedness, I may as well talk about politics, games, or anything else that strikes my fancy.

On the investing front, the only major change in attitude over the past year was the decision to add small amounts of a gold ETF (GLD). In the past I've pointed out the weaknesses in gold as an investment. It's an inert metal and doesn't generate profits or income, and it can rise or fall sharply in value based on the irrationality of investors rather than any fundamental cause.

The increase in the metal's price over the past few years has begun to bitch slap me up the head. Everyday it went up a little pained me, so in a move designed to calm my frayed nerves I took out a small position so that when it goes shooting upwards on days when stocks fall, I can feel like I'm sharing in the exuberance. This decision was made easier by the Federal Reserve's decision to cut rates when Wall Street demanded one and by the ongoing fall of the dollar. The government seems to want to see the dollar tank to boost exports and keep the party going, and given that gold has gone up as the Fed pumps more liquidity into the system, it doesn't seem like a high risk move to add a little gold to the portfolio to hedge against inflation. I don't expect to make a killing here- I just want to protect my pile of dollars against the cruelest tax.

Discipline is important, and I watch that gold position like a hawk. It worries me. But I worry about the Fed's free money/market put more.