Morningstar: My Pile of “Too Hard” Investments is Pretty Big

Morningstar: My Pile of “Too Hard” Investments is Pretty Big

In a recent Morningstar article, personal finance director Christine Benz explained that the list of investments she chooses to pass on—the “too hard” pile—has grown larger and continues to expand.

“As I’ve gained more investment knowledge—and more knowledge of myself as an investor and what I’m trying to accomplish—it has gotten easier to pass on investments because they’re outside my own circle of competence (Buffett and Munger’s definition of “too hard”) or require more time or patience than I’m able to put into them.”

Benz stipulates that everyone’s list will be unique to them, adding “it’s also worth giving weight to peace of mind, simplicity, and time-management considerations when deciding whether a given investment or strategy is ‘worth it.’”

Benz shares a list of stocks on her “too hard” pile:

  • Individual stocks: “I’ve monitored actively managed funds for many years, so I know how hard it is for even professional active managers to consistently outperform inexpensive index-tracking funds by picking stocks.”
  • Actively managed funds: “It’s harder to ride herd on a group of actively managed funds than it is a portfolio composed largely of broad-market index-tracking investments.”
  • Leveraged investing: Citing a current trend in which wealthy investors are borrowing against stock and bond holdings to buy more assets, Benz argues, “That sounds good on paper, but there’s a countervailing force that would make that unworkable for me. I’ve gotten addicted to the peace of mind that comes with being debt-free, and no amount of gains magnified by leverage can offset that.”
  • Frequent rebalancing, according to Benz, the practice “just doesn’t seem worth the time it might take. More important, looking at my portfolio very frequently helps me be comfortable with an equity exposure that’s quite high relative to most recommendations for people in my age group.”