These Boring Investments Have Been Beautiful
They may not be the sexiest ideas, but investors say they've delivered over the long term.
They may not be the sexiest ideas, but investors say they've delivered over the long term.
Everyone knows an investor with a great story to tell. Maybe he bought a high-flying tech stock that tripled in price before he sold it. Or maybe she put a huge chunk of her portfolio in financial-services stocks near their bottom during the 2008-09 banking crisis, and rode the rally all the way up to today.
Tales like these may make for good conversation, but they are by far the exception among successful individual investors. In fact, what works for most investors may seem a little, well, boring by comparison.
One investor who has built an empire based on so-called boring investments is Warren Buffett. On Saturday his firm, Berkshire Hathaway (BRK.A) (BRK.B), held its annual meeting, and in the days leading up to it we asked readers on our Personal Finance discussion board what boring investments had worked well for them.
Readers mentioned a broad range of not only stocks but other asset classes, as well. What follows are some of the highlights, and you can read the full discussion here.
'Some Wonderfully Boring Companies'
Readers had no shortage of boring investment ideas to share, beginning with some blue-chip stocks.
" Ford (F). I bought it for under $2 in 2009 when it was the only U.S. car manufacturer not asking for a bailout. Ford is still undervalued and yields about 3%,"wrote rkelly.
"My most boring investments have been Philip Morris (PM) and Altria (MO)," wrote Peter5. "I've just let these cash machines do what they do best. Sure, I would have been a bit smarter to have reinvested the dividends all these decades, but the cash has paid for many fine family trips, so I'm a mighty satisfied shareholder."
Reader Chang took the discussion in a slightly different direction with this tasty stock tip. " McCormick & Company (MKC). It went from $63 to $72 in the last two months, and I haven't even collected a dividend. I doubt people will stop buying oregano or cinnamon even during a recession."
Another reader, cliff, offered his own ingredients for a successful, if somewhat boring, investing experience.
"There are several equity investments that have worked out really well for me," cliff said. "According to this recipe: Buy solid companies with a somewhat higher yield and the promise to grow the dollar distribution. Add and fold in extra shares bought with quarterly distributions. Do not stir, do not peek at half-baked results, and do not sell. Let simmer for 10 years. Enjoy the fruits."
Many readers mentioned favorite boring funds, which offer a sense of security, if not short-term thrills.
" Vanguard Wellesley Income (VWINX) has a great long-term track record without the volatility of racier funds," said mbresler. "I sleep well owning this fund (actually its Admiral counterpart (VWIAX)), even with its interest-rate exposure. I also own some wonderfully boring companies like Altria, Johnson & Johnson (JNJ), Kraft Foods , American Electric Power (AEP), Southern (SO), National Grid (NGG), and Royal Dutch Shell that just keep spitting out dividends, which will soon serve as a retirement income stream."
Some readers also named master limited partnerships as their favorite low-drama investments.
One was mkisorusa, who wrote, "MLPs. I've been aboard for five-plus years. I originally bought Enterprise Products Partners (EPD) and Sunoco Logistics Partners for their steady income streams. The very nice capital gains have been a big plus."
'Boring Is in the Eye of the Beholder'
Then there were those who sang the praises of the common index fund.
"Stock index funds are about as boring as they come, and we have done well with those, including foreign-stock ones,"wrote retiredgary.
Alpro1 agreed. " Vanguard Total Stock Market Index (VTSMX), extended-markets, developed-markets, and target-date funds are all buy-and-hold, let-them-work investments. Buy-and-hold may be considered boring, but the dividends and capital gains distributions are certainly not."
In fact, many investors pointed out the importance of sticking with their "boring" investments over long time periods.
"Two funds come to mind, both held for 25-plus years and just allowed to 'ride,'" wrote mfinvestor. " Harbor International (HIINX) and Vanguard Health Care (VGHCX) have been great selections. I realize the Harbor International has run a bit behind since Hakan Castegren's death, but I have no intentions of shedding it just yet. Vanguard Health Care (I own the Admiral shares now) just keeps on giving. Maybe not always leading (partly due to its size), but over time doing well."
Weiwentg is another investor taking the long view when it comes to making investment decisions. " Vanguard Target Retirement 2050 (VFIFX). This is my largest single position in anything, and I have an automatic monthly purchase order," this reader said. "That has saved me from myself (that is, reducing the temptation and capital available to trade, forcing me to select my very best ideas if I invest in individual stocks). Berkshire Hathaway [is my] second-largest position. Self-explanatory. I bought during the Great Recession, and have hung on since."
Skipperchg offered a no-drama endorsement of Tweedy, Browne Global Value (TBGVX). "I have been with them for many, many years," Skipperchg said. "Not only do I still have my capital, I've got a tidy return on that capital. You don't have to supervise this fund. Just check in every few years to see how much you've made, or congratulate yourself on how much you did not lose in the most recent meltdown. [There is not much extra return] in hot markets, but [the fund is] steady-as-she-goes in down markets."
Of course, whether any of these investments truly is boring may not be a universal agreement. As noted by festus, "Boring is in the eye of the beholder. All my American Funds equity funds are boring to me, but I love the returns! Nice to have such quality managers looking out for me."
'Very Boring but Do Their Thing'
Many commenters pointed to their fixed-income holdings as boring, but beneficial, pieces of their portfolios.
"For the last 25 years, I have been buying investment-grade long-term municipal bonds whenever the interest rate equals or exceeds 5%," said DrBobb. "I hold a diversified portfolio of revenue bonds. Since I buy long-term bonds most years, over time a bond portfolio ladder has been created. Today nearly 40% of our aftertax retirement income comes from this self-created 'pension' of muni bonds. They are very boring, very dependable, and extremely tax-efficient!"
BMWLover uses a similar approach, but with a different investment vehicle.
"I like my boring, old preferred stocks that are yielding from 6%-7%," this reader wrote. "They provide a steady stream of income, have higher yields, and better credit ratings than some junk bonds, and if I foresee problems coming down the road, I am able to trade out of them reasonably quickly. The only thing I don't like is being called out of them."
Several readers mentioned I-bonds as a great boring investment. Tomas47 was among them.
"I-Bonds bought in 2003 have done exactly what I wanted in the portfolio," he wrote. "[They've had] about 3.7% nominal return. At the time I bought them you could use a credit card, so with my 1% rebate, actually was able to effectively buy them at a discount."
As for bond funds, a couple of readers mentioned Franklin funds as among their favorites.
"Franklin Federal Tax-Free Income (FKTIX)," wrote rforno. "My parents got it for me back in the 1980s, and that one tax-free fund has grown quite nicely over the years, reinvesting itself. [I also like] dividend-paying and -growing companies, too. Whether it's something like General Electric (GE) or Sysco (SYY) or more exotic like Parkland Fuel (PKIUF), they're (normally) very boring but 'do their thing' in silence. Frankly, I prefer my investing to be boring."
"My best boring investment has been Franklin Income (FKINX) fund, up over 30% in the past two-and-a-half years with reinvested dividends," said cleansmile. "This fund smartly moved from bonds to dividend stocks at the most opportune time. Dividends are down a bit but still substantial for anyone like me looking for income."
'A Great Return on My Money With Pretty Much No Risk'
Still others mentioned as their favorite boring investment their employers' retirement plans or specific features of one.
Mlott1 wrote, "My best boring investment was when I was still working, for the Department of Defense. I had 5% of my salary going into the Thrift Savings Plan (basically a 401(k) for government employees). I put the majority of my contributions into the safe and boring G fund, which consisted of specially issued government securities that didn't go down in value, so it was about like a stable-value fund in a conventional 401(k). The first 3% of my contributions were matched dollar-for-dollar, and the fourth and fifth percent were matched $0.50 to the dollar. So when you figure in the matching money, plus the little bit of interest (about 2.5% the last few years), I was getting a great return on my money with pretty much no risk."
BobVermont said his favorite was "my 401(k) stable-value fund. It is my safe harbor. It serves as my 50% bond allocation during these increasing interest-rate times, and I don't have to worry or give it a second thought."
'A Central Piece of Our Long-Term Care Planning'
Not all of our readers' favorite boring investments involved stocks or bonds, however. Real estate was mentioned by many, from the simple idea of prepaying one's mortgage to specific property purchases.
"We purchased our first house on a Veterans Affairs loan with 100% financing at 13.5% in 1983," recalled roacher. "We refinanced in 1985 when prices rose quickly as interest rates dropped. We turned the house into a rental in 1991 and carried a $600-per-month negative cash flow for two years but with huge tax benefits. We had put a second mortgage on it so as to purchase another house. We refinanced again later to get below a 6% rate and used full rent to pay off the house four years early. Now the entire rent is a positive monthly income stream."
Tevye2003 mentioned an insurance policy as a "really boring" investment that has provided piece of mind.
"Thirty years ago I took out a $100,000 whole-life insurance policy with Northwestern Mutual--$125 a month auto debit," Tevye2003 wrote. "Due to dividends, it currently has a cash value of $140,000 and $250,000 insurance. Evaluating this as an investment is complicated, but the insurance payoff could be considered the equivalent of a 10% tax-free return. You do have to die, which poses something of a problem. One could also borrow up to the cash value tax-free. Anyway, it's evolved to be a central piece of our long-term care planning."
Investing can be exciting, to be sure, but as the readers above have shown, boring often provides the better night's sleep.
Adam Zoll does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.