A Behind the Scenes Look at My Personal Retirement Plan Strategy for 2006

In recent years, I have pulled back the curtain on occasion to give you a peek into my retirement portfolio. The one that will allow me to live the remainder of my days enjoying the lifestyle to which I've become accustomed while giving tens of millions to the Lord's work. The one that contains secret get-rich-quick strategies which have made me, and could make you, rich beyond your wildest ambitions. The one . . .

Right. In my dreams. The truth is, if you're looking for excitement, my portfolio isn't where you want to start your search. For the most part, it's filled with the same strategies we teach to SMI readers and web members. It has returned a solid (in light of the market environment) 9.4% per year over the past half decade. Exciting? I don't want excitement. I want effectiveness and relative safety. Given that the market returned just 2.1% annually during the same period (which included the worst bear market since the 1930s), my portfolio is getting the job done.

I don't share these details in order to provide a blueprint for you to follow. But, if you've been hesitant to get started in the SMI way of investing, perhaps it will encourage you to see that I have faith in the strategies we recommend. I have staked my financial future on their continued profitability.

• 40% in SMI's Fund Upgrading strategy. I like to divide my retirement portfolio into four parts, each guided by a different investing strategy. This diversification gives me peace of mind. Among the four, Upgrading receives the lion's share. If I could choose only one strategy, this would be the one I would follow (and would recommend to you). In recent years, although I tried to own all the recommended stock funds in each category, not all were always available at my broker (see Upgrading: Easy as 1-2-3 ). Also, I occasionally got preoccupied and didn't make my changes promptly (not months late, but sometimes a few weeks). The result was that my personal results slightly trailed the performance results we publish in SMI (see our Performance History). This year I'm taking advantage of the new Sound Mind Investing Fund and investing all of my Upgrading money there where it will get daily attention. (For more information, see Introducing the Sound Mind Investing Fund.)

• 20% in SMI's Enhanced Just-the-Basics strategy. A slightly advanced version of our traditional Just-the-Basics, this strategy combines a heavy indexing emphasis with a few actively-managed funds that are reviewed quarterly. It's been successful in beating the market four of the past five years and yet retains a great deal of simplicity. (See our Enhanced Just-the-Basics page  for more information.)

• 10% in a "special situations" strategy. Here I can make investments that catch my eye without taking money away from my three primary strategies. For the past two years, the majority of this money has gone into SMI's "sector rotation" strategy . It's high risk, but has a great long-term record (around 30% a year over the past 15 years) and has, as you can see in the table, done great things for my portfolio.

• 30% in a market-timing strategy. Using skills I picked up during the 12 years when I made my living as a market-timer, the goal here is to preserve capital during bear markets (mission accomplished in 2001-2002) and at least equal the market during the good times (not so good the past two years). This safety valve provides me the psychological comfort needed to let my other strategies take higher risks. This is the only strategy I use that is not recommended for you to try as well. Market-timing is not recommended for the average investor.

So, there's my personal investing plan for 2006. What's yours? Or more to the point, do you have one? You need a strategy that is shaped to fit your temperament, long-term goals, and level of understanding. If you haven't put yours together yet, make it your top financial priority for the next few weeks. Your likelihood of long-term success will be greatly enhanced if you always plan according to your goals, and invest according to your plan.

• Editorials page
• SMI Performance History page
• SMI Fund Upgrading strategy
• SMI Just-the-Basics stragey
• Enhanced Just-the-Basics page 
• SMI Advanced Strategies page 

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