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Cameras, Computers, and Mutual Funds

My wife writes a food blog.* For years, she used a simple “point & shoot” digital camera for all the photos. But as she learned more about photography, she realized that she would have to upgrade her camera in order to reach the level of photo quality to which she aspired.

While we were researching the purchase, I visited the Digital-Photography-School forums to ask the experts for their input. Before I knew it, I was looking at a $2,400 camera, a $380 lens, and a few hundred dollars of accompanying gear.

I had a similar experience shopping for a new laptop early last year. Any new computer would have beaten the pants off our 2004 vintage MacBook, but after reading several articles and reviews, I found myself leaning toward a rather high-end machine.

In both cases, I found that it was helpful to take a step back and think about our needs. After all, a feature that someone else considers an absolute necessity might end up going entirely unnoticed in our hands.

What This Has to Do with Investing

When researching a purchase–especially in a field in which you’re not an expert–it’s easy to get overwhelmed or talked into something you don’t really need.

The same thing goes for building a portfolio. While researching the decision, you’re going to get a whole list of varying suggestions, even from those of us who agree that a low-cost, passively managed portfolio is the way to go. For example:

  • Some people will say it’s important to rebalance annually. Others will say every 2 years. Others will say to do it every time your asset allocation is out of whack by a specific percentage.
  • Some people will insist that you’re better off if you overweight small-cap stocks and/or value stocks.
  • Some people will insist that you need to have a certain portion of your portfolio in emerging markets, REITs, gold, commodities, or any of 100 other things.
  • Some people will insist that you need to include corporate bonds in your portfolio. Others will argue that it’s better to stick to Treasuries.

The result I see over and over is that an investor will end up with a portfolio that has so many moving parts he/she isn’t entirely sure how to operate it. That is, a portfolio that made perfect sense in the hands of the person recommending it (an investing aficionado) ends up being a poor fit for the person who’s new to the field or who simply takes less interest in managing his/her portfolio.

Simplifying Your Portfolio

My advice is to simplify your portfolio until it reaches the point where you understand all your holdings, why they’re in your portfolio, and how/when you’re supposed to move money between them. If that means using ten funds, super. If it means using just two or three funds (or even just one), that’s perfectly fine too.

*Shameless plug: She writes at Wheat Free Meat Free, where she shares gluten-free vegetarian recipes.

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Comments

  1. So what did you end up getting for the camera and the computer?

  2. Hehe, fun question. :)

    Canon Rebel T2i with this 50mm lens. (Seems to have worked out well so far.)

    As for the computer, we bought an Asus notebook that in the 13 months since appears to have been replaced by this. Frankly, I don’t recommend it at all. The keyboard misses keystrokes if you go above ~40wpm, which is a heck of a pain in the neck for me. For whatever reason, this wasn’t mentioned in any of the available reviews at the time. (Though in terms of processor speed/RAM/etc, it’s definitely more than sufficient for our needs.)

  3. Mike, excellent choice on the camera for going from point and shoot to SLR. I have a T1i and it is great! You can spend $2500 on the next camera in 3 years :-)

  4. Yeah…I figure we’ll know if/when we reach that point. ;)

  5. Kathryn C says:

    wow, so many questions. but I’ll stick to just one…which forum did you find most useful for novice photographers? I have a canon G10 and not so swift on the settings but want to get better so I can use some pics for my blog. Tried to find some good sites/blogs the other night and got overwhelmed and gave up (which is how must people feel when they’re dealing with their finances so I chuckled at myself). Are there any you recommend? And, I like the food plugs!
    Kathryn

  6. Hi Kathryn.

    I wish I had more/better information for you, but photography isn’t exactly an area of expertise for me! (My wife–the food blogger–knows much more than I do, but she’s still learning too.)

    Per her suggestion, Digital Photography School is a many-authored blog that is quite useful, and they have a very active forum as well.

  7. Mike: “Some people will say it’s important to rebalance annually. Others will say every 2 years. Others will say to do it every time your asset allocation is out of whack by a specific percentage.”

    Considering what the markets have done in the past few days, my asset allocation has pretty much rebalanced itself automatically!

  8. Kathryn C says:

    Thanks Mike! I just checked out the site….looks very good.

  9. Mike,

    With investing and photography if you get all the basics right it’s probably 90% of ideal. The last 10% you can work on forever and still not get it perfect. Luckily, you can get great results without perfection.

    If your portfolio has an appropriate asset allocation, is diversified, has a simple rebalancing scheme, uses low cost funds, and doesn’t try to time the market there isn’t much left that is going to make a big difference to the rate of return. Yes, you could find equivalent funds that have lower costs, or rebalance more effectively, or get a slightly better asset allocation. But unless you have a huge portfolio you would be much better off putting the extra effort into contributing more $$$.

    I checked out your wife’s web page and I had some specific suggestions- where would be a good place to send/post them?

    -Rick Francis

  10. Hi Rick.

    Thanks for taking the time to offer feedback. (And for relating it to something I understand.) :)

    You can reach her at: Kalinda@wheatfreemeatfree.com, or you can just post a comment on any post of course.

If you want to discuss this article, I recommend starting a conversation over at the Bogleheads investing forum.
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