What’s Wrong with Cargo Shorts?
Cargo short pants were recently the subject of a highly confrontational article in the Wall Street Journal. The author of the article was questioning the fashion statement of men wearing cargo short pants (Nice Cargo Shorts! You’re Sleeping on the Sofa by Nicole Hong, August 1, 2016). It was an entertaining read and as you can imagine men were on one side of the argument and women on the other. Cargo shorts are incredibly efficient especially now a days with all the items we need to carry. They’re also comfortable as I sometimes wear them while mowing the north forty. I do get the author’s point about cargo pants as a fashion statement but what’s wrong with wearing comfortable and efficient shorts?
Passive investments may be the cargo shorts of the investment world. At cocktail party’s partygoers could care less about your portfolio of diversified index funds that you plan to hold forever. They look at you as if you have three heads while you try to explain the beauty of growing your wealth slowly. The socialites only want to know about the hot stock your broker is buying or where you park your hedge fund money.
Does it make sense to poke fun at efficient items that make your life better? Index funds offer you the ability to buy investments from around the world with minimal costs. A portfolio of six mutual funds from Dimensional Fund Advisors generated a five-year average annual return of 9.21 percent. These funds expose your portfolio to large, small, international, real-estate and fixed income securities. The six funds own over 14,000 securities scattered around the globe. This is an extremely efficient, low cost portfolio.
Buying index funds also remove the anxiety of trying to time the market because of diversification and the annual rebalancing of your accounts. As you construct your investment portfolio look to index funds to make your life more efficient.
It’s okay to wear cargo shorts and it’s okay to buy index funds. Gosh darn it!
Teach me knowledge and good judgment, for I trust your commands. ~ Psalm 119:66
Bill Parrott is the President and CEO of Parrott Wealth Management, LLC. www.parrottwealth.com.
Note: The six funds in the portfolio are the DFA Core Equity 1 (DFEOX), DFA Small U.S. Small Cap Portfolio (DFSTX), DFA International Core (DFIEX), DFA Core Emerging Markets (DFCEX), DFA Real Estate (DFREX) and the DFA Intermediate-Term Quality (DFTEX). This article is not an offer to buy or sell securities. The mutual funds highlighted are for informational purposes only. Your returns may be more or less than the return highlighted.
 Morningstar Hypothetical Tool accessed 9/7/2016. The fund data covers the years 8/31/2011 to 8/31/2016.