As I discussed in my previous post, our current allocation is far far too conservative given our ages and the fact that we want our money to grow. However, my husband and I are still pretty new at this, and it takes a lot of thought to get from being pleased with "wow! we make more than $100 each month from interest on our savings accounts, CDs and other conservative positions" all the way to "we're losing money by being so conservative - we could be making so much more than 5% on our savings." We've already taken several really good concrete steps, including opening a Roth IRA, and taking a more proactive approach to the investments we have. However, since more than 50% of our non-retirement money is pretty liquid, I still think we're being too conservative. So, I've been trying to brainstorm ways to help both of us feel bolder. Here are some of the things I've come up with so far, and am going to try. I would also really appreciate any comments or thoughts you all might have.
1) Sell an investment (specifically this crappy bond fund we're in). This will hopefully make us feel more in control of our current investments, so that putting money into a stock or mutual fund doesn't feel like we can never get our money back. Seeing how quickly it shows up as cash in our account will hopefully overcome the out-of-control feeling once our money is "out there" in the market.
2) Discuss and decide on the appropriate amount of emergency/buffer money to keep in cash. Then we will have to be bold about putting the rest of it to work. If we can actually do that, I think we'll be okay about moving future surpluses out of our cash accounts.
3) Create a prioritized hierarchy of accounts. This goes along with #2, since I think we will be much more likely to actually follow through if there's a very simple pattern to follow. If we set specific targets for how much we want to fund each account, then we can just keep moving up the hierarchy as we fulfill each goal.
4) Go index-heavy. This was already the core of our plans for asset allocation, but by knowing that our volatility isn’t higher than the market (looking at the beta figure), and that we’re well diversified among our equities, I think we’ll be better able to avoid checking our balances too often, which we might do if we felt like we needed to check the performances of our fund managers.