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Set up your retirement account. Just do it. Then forget it.

My new mortgage company wants to see the balance of my 401(K) account. That turned out to be a bit of a problem, but for the right reasons.

You see, I might or might not get 401(K) statements. I don’t look at them. Sometimes I save them. Usually I don’t. So I hadn’t looked at my 401(K) balance in years, and I really only had a vague idea what was in it. I knew there ought to be enough to make the lender happy.

What I found when I finally got my hands on a statement shows why part of my strategy is to never look at the account.

My worst account, set up when I was working for someone who had basically a one-size-fits-everyone-my-age plan, still had grown a lot more than I had expected.

My best account, set up in 2009 during the market’s darkest hours, has increased in value more than 250%. It was an opportunity of a lifetime, I said at the time. I was right.

My secret is simple: Invest about 50% in the Wilshire 5000, an index that covers the entire U.S. stock market. (If that’s not available, look for the S&P 500, which is the 500 largest companies, and Wilshire 4500, which is the rest of the market). Invest another 20% in an international fund, 20% in a growth fund and 10% in bonds. Contribute from every paycheck, not once a year. Set the account to rebalance automatically every quarter. This forces me to sell high and buy low, and since I never look at my statements, I never question it. It never becomes an emotional decision. It’s just a formula that repeats itself over and over.

If your 401(K) doesn’t offer that kind of control, pick a target fund near your retirement year. It selects a mix of stock similar to above, tweaking it based on how soon you’ll be needing to cash out, and automatically rebalances. As a managed fund, its fees are higher, but generally works well and, again, takes the emotion out of it.

If your employer offers both a conventional 401(K) and a Roth 401(K), here’s some advice regarding the two.

And that’s it. For best results, don’t even look at it, except if you change jobs and need to roll the old one over. You may want to do that because the fees can eat too far into your earnings.

Beating the market

I don’t try to beat the market, but don’t get the idea that I think the market is infallible. It makes mistakes all the time, and this strategy takes advantage of it. When broad categories of investments lose value for no good reason–which happens every year–this formula forces you to buy in. When the market realizes its mistake, the formula forces you to cash in and buy whatever the market is down on at that particular moment.

The other thing it does is take greed and desperation out of the market, two very dangerous things. Late in his life, my dad lost a lot of his savings–nobody knows how much–to the kind of penny stock scam that was the subject of the movie The Wolf of Wall Street. Dad was doing fine, but he got greedy. His brother did even worse, losing their parents’ fortune to a series of get-rich-quick schemes. He was already richer than I’ll ever be, so there was no need for that.

I barely knew my grandfather, but from what I’ve been able to piece together, he became a multimillionaire mostly by sticking to solid, conventional investments, buying low and selling high, and keeping his money invested for decades. And he started during the Great Depression and World War II, during the financial doldrums when everyone thinks nobody made any money.


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