Safe Retirement Investing In The ‘Middle Lane’

A recent study by the Insurance Institute for Highway Safety found that we’re having far fewer fatal crashes, down 42% for older drivers and 30% for middle-aged folks.

The news on older drivers made the headlines, but the fact is we’re all safer.  Think about the last time you actually saw a fender bender in traffic, much less a collision or something more serious. It’s getting rare, and even when they happen people increasingly walk away unharmed.

What does this have to do with safe retirement investing? A lot, when you think about it. Consider why accident rates are falling. Older drivers are healthier than in the past. Graduated licensing schemes keep the very youngest and inexperienced off the road longer.

And, largely, cars and roads are safer. Highways are just better designed, and cars come now with a panoply of features unheard of 10 years ago — airbags all around, anti-lock brakes, better crumple zones, all kinds of advances.

Pretty soon, accident-avoidance technology, a kind of in-car radar that warns you of nearby vehicles, will be standard. Cars will brake in anticipation of things you don’t even see. It’s pretty amazing stuff.

Now consider the investing world. Back in the early days of the stock market, you’d have been out of your mind to own stocks. The Great Crash of 1929 happened largely because so many inexperienced investors got into a market with little or no regulation.

The laws are more strict these days, but that won’t stop you from making bad choices. So the industry came up with mutual funds as  way to remove that impediment. Leave it to a pro and pay the fund fees and you’ll be fine.

It worked pretty well for a while, but then technology gave us even more of an advantage. The advent of index funds and exchange-traded funds (ETFs) essentially took away the human element and put us into the whole market.

‘Arrive alive’ retirement investing

Speeding along at the market’s pace in the middle lane might not be very exciting, but you won’t get run off the road into a guardrail either. “Middle-lane” investing using index ETFs is the perfect speed for retirement-oriented investors who don’t care about being five minutes late to the party as long as they arrive in one piece.

To extend the metaphor, portfolio indexing is the nifty tech that builds in allowances for the bumps and shifts of tight traffic, the airbags, brakes and radar you need to make sure you get the most out of the ride.

Owning whole-market indexes is helpful, while owning a portfolio of those indexes gives you the ability to rebalance and keep right on going. Consider it cruise control for your investments.

How automated could it get? It’s hard to say, but the advances we’ve made so far, in both driving and saving well for retirement, are cause for considerable optimism.