Investments October 2009

So, money isn't everything, but the goal is to have sufficient for your need. There are two problems. First is defining what qualifies as having sufficient for whatever needs you think you have. Second is figuring out how to get a sufficient amount in a moral way. Tackling the first problem has been a bugaboo for all of human history. Fortunately, my concern is not the rest of humanity, just me.

The last 10 years of my mother's life, whenever I would visit, she would tell me the same story. It went something like, "One day Daddy came home. He said, 'I just paid of the last installment on the china dishes. Make me a promise that we will never go in debt again.'" And then she would give me the same mini lecture about staying out of debt and living within our means. I'm not really sure why she felt strongly about it, except for the fact that we have always had debt -- the house, a car (not now), and credit cards.

But we have always had assets, too. One of the traits I've had since I was small was saving. My Aunt Eva would take me with her on vacations and learned to give me two dollars if she wanted me to actually buy a souvenir because I would save one if that's all she gave me. I kept a homemade ledger of the money I earned as a pre-teen and teenager mowing lawns in the summer and shoveling walks in the winter. By today's standards, my income was minimal.

I opened my own bank account at age 11 or 12, going to a neighborhood bank with my meager savings (I kept them for a long time in a pill bottle). This was a different bank than the one my step-dad worked at. When I worked during the summer in my college years, I saved nearly all of it. I even saved $25 a month as a starving graduate student.

Then, in 1984 when we were still relatively young and with three children under the age of two and needing all the money we could gather just to keep our small family fed, I got an offer for a promotion to a tenure-line faculty position at the University of Southern California. I initially turned in down. Dean Biles had me in his office asking me why I didn't want it. I had three reasons. I would have to teach (which I am not good at), I would have to serve on committees (which would take me away from research), and no raise had been offered. So, in my mind, I was getting more work for no more pay. We negotiated a raise and I took the position. He also gave me advice about joining the faculty retirement plan. USC gave a liberal match (9%). I gave half of the raise (5%) as my pre-tax contribution and I was off to saving and investing again. I continued the practice when we moved to Bowman Gray School of Medicine and when I left Bowman Gray to start my own company.

How much do I need? I'm not sure. My goal isn't to be wealthy. My goal is to simply have sufficient for some as yet undefined needs. But I can imagine what some of those needs will be based on what they seem to have been in the past. They have nearly always been unexpected (mostly because I haven't been smart enough to anticipate them and because they are defined at least as much by my family and their needs as my own). My needs are things like the garden and greenhouse; not expensive, but not cheap, especially when you are wanting money that is more urgently needed elsewhere. So, instead of trying to figure out my needs, I have simply tried to follow a pattern of regular additions to my retirement accounts and then wise investing after that.

Up until October 2008, when I should have pulled the money invested in mutual funds out -- like everyone else -- I had done well; up 22% on average per year over a 14 year period. I lost 40% in the crash, but, as I reminded myself at the end, I still had sufficient for my needs.

I started investing again in March of this year (2009). The funds I picked have done well since then, although I was cautious and kept more money out of play than I put into play. Hindsight is wonderful, but not practical. There are no guarantees about the future. I anticipated the crash before it happened, but didn't act. Wise investing has to be a long term process.

I still think I have sufficient for my needs, however now, because I am past that magic age of 59 1/2, I am aware that the government takes a large portion of retirement accounts when they are withdrawn. So, ultimately, I may not have sufficient for my needs and the needs of my family.

There are economic perils ahead. The dollar is going to lose value. Markets may yet crash again. Money isn't everything, but having sufficient to help you provide for your needs is a basic issue that occupies at least 10 minutes of my life every week.