How I Invest My Own Money

Inspired by the new book, How I Invest My Money, I wanted to share how I invest my own money.

First of all, the best investment decision I’ve ever made was developing good savings habits at a young age. For some reason I’ve always been a saver. Part of it is personality-based. Part of it is I was passed down good traits from my parents.

My parents were always relatively frugal, never got into a lot of debt and were always good with their money. I learned a lot from just watching my mom and dad about things like spending wisely, staying out of credit card debt and saving for the future.

I came into the finance industry in the mid-2000s but didn’t start truly saving with real money until the onset of the financial crisis. Some of the best investments I’ve ever made came during that time and it was as simple as just continuing to plow money into my 401(k) and IRA during 2008.

It felt like every time I put money in the market just fell further but those are the best stock market purchases I’ll ever make. Being thrown into the fire like that early on in my investing career really helped give me the right mindset for how to view down markets as being an opportunity, not a risk.

Before getting into specifics I want to issue a full disclaimer — my investments are relatively boring. But boring works for me because I think boring wins over the long run. Exciting is the enemy for most investors.

I also have a high threshold for risk. I’ve had the majority of our money in stocks for as long as I’ve been invested. And most of that money is in tax-deferred retirement accounts.

I have a 401(k) with Ritholtz Wealth Management, an old 401(k) that I rolled over into an IRA and then my wife has a 403(b).

All of the money in these accounts is invested in low-cost index funds or other rules-based strategies. This money is in the same strategies and funds that our clients use. I am an aggressive investor so basically all of that money is invest in the stock market in a diversified mix of strategies, market caps and regions of the world.

I also have a SEP-IRA with Vanguard. That money is invested in a simple four-fund index fund portfolio, again all in the stock market.

All of these investments are set on autopilot. The contributions happen automatically. The dividends are reinvested automatically. The rebalancing happens automatically. I want all of these decisions out of my hands, so I don’t have to worry about them. And I find that just the convenience of doing this makes my life easier.

And honestly, it improves my performance because it keeps me from tinkering with these accounts.

I recently opened a Liftoff account. Liftoff is our automated investing platform in partnership with Betterment. I have a sleeve for my wife and myself along with one for each of my 3 children.

I plan on using this account as a teaching tool to show my kids how money can grow over time from periodic savings and use it to give them a jumpstart once they’re done with school. This account is also fully automated so the only thing I have to worry about is increasing the amount we save over time.

When all my kids were born, I opened up a 529 account in each of their names. The Michigan plan is run by TIAA-CREF. They have low-cost target date funds. I use the most aggressive allocation which will slowly get more conservative as my kids age.

My fun portfolio with Robinhood makes up 5% to 7% of our investments. This account helps me scratch an itch by picking some stocks and ETFs I wouldn’t normally hold in my rules-based accounts. I have 8 or 9 holdings in this account.

I basically use the Peter Lynch methodology of investing in companies I know or use. Companies like Disney, Spotify, Slack (soon to be Salesforce) and Stitch Fix.

I look at my overall strategy as a barbell approach with risky investments on one end and ultra-safe investments on the other. Those safe assets are held in an online savings account with Marcus.

That money is used to get us through any big purchases or unexpected outlays in the short term to medium term. This cash allows us to stay invested on the other end of the barbell since we know most of those assets won’t be used for many years.

And being a saver with a portfolio gives you the best of both worlds.

If markets go up I’m buying in at higher prices but the value of my current holdings goes up. And if markets go down, the value of my holdings goes down but now I have the ability to buy at lower prices, higher yields and lower valuations.

This is a wonderful way to not worry that much about the stock market (in theory at least).

I have put some money into some alternative investments in recent years. There are a few reasons for this:

(1) Interest rates are insanely low.

(2) I’m looking for diversification benefits since so many of my investments are in the stock market.

(3) These are somewhat experimental investments. If eventually our clients are ever going to be investing in this stuff (and I’m not saying that they are), I want to test this stuff out first. I don’t want to put client money into something that I wouldn’t invest in myself. I want to understand these investments from an operational, liquidity and reporting perspective.

So far these alternatives include crypto, art, real estate.

I’ve talked about bitcoin plenty in recent weeks but this is basically a play on human nature and the potential for new technology to carve out some space in the financial markets.

Masterworks allows you to invest in art, an asset class historically reserved for the uber-wealthy. Part of my thesis here is rich people have too much money and not enough places to put it. And the art market actually has pretty decent data on past returns.

Fundrise allows you to invest directly in private real estate. I like the idea of investing in direct real estate in a diversified way without having to become a landlord myself.

We’ve had founders for both companies on Animal Spirits in the past and came away impressed with their stories.

I also have a small ownership stake in my firm. My equity stake in Ritholtz Wealth is one of the assets I’m most proud of because it’s a firm I love to work for. I love the people I work with. I love our clients. I love the way that we’ve built the business. If that equity becomes a financial windfall someday, that’s icing on the cake but I derive a lot of psychic income from this asset because it’s part of my livelihood.

We do carry a mortgage on our house. We recently refinanced into a 15-year mortgage. I don’t mind holding debt with rates so ridiculously low right now but I also love the idea of having our house paid off and the optionality it provides right when our youngest will be turning 18 and leaving the house.

Another point of emphasis for my family is investing in experiences. A few years ago, one of our friends commented to us, “You know, if you think about it, we only have 15 or 16 summers left with them before they go off to college and become adults. And it’s going to go really fast.”

So a few years ago my family found a place on a lake about an hour from our home (it helps that real estate is still relatively inexpensive in Michigan). It’s a place where we’re outside all of the time, we’re on the water and we’re creating memories. I view this as an investment in experiences with my family and you can’t calculate the return on the opportunity cost of that money.

It’s easily one of the best investments we’ve ever made.

That’s pretty much it. That’s how I invest my money.

I’m sure this can and will change over the years as my risk profile and time horizon changes.

But the things that likely won’t change in years ahead is that I will continue to be a saver and I will continue to bet on the stock market which remains the best way to bet on human ingenuity and innovation.

This doesn’t mean the stock market isn’t risky because it is.

I hedge this out by investing like the glass is half full but saving like the glass is half empty.