Mental Preparedness of Cooks and Investors

Cooking and investing share at least one aspect: You decide the details. The three nikujaga recipes I looked at the other day suggested widely different potato-to-beef ratios and soy-sauce timings. I didn’t bother to determine which recipe was the best. As is often the case with internet recipes, each of them was expected to result in a decent meal. While using them as a rough guideline, I improvised a lot in the details. I put more carrots than suggested, because I like them and because there were many left in the fridge. This way I enjoyed the cooking, and my girlfriend enjoyed the meal.

In asset allocation too, your own style matters. There are a couple of asset classes, such as large domestic stocks and government bonds, which every investor is encouraged to hold. Beyond that, many additional products such as real estate and commodities are also recommended in some books, but not in others. At one point I was almost embarrassed by the wide range of advices that seemed, in detail, inconsistent among themselves. But I have come to realize that textbooks are references, not rules. An investor should consider his/her own preferences and circumstances in determining the details of portfolio, just like a cook adjusts the amounts of ingredients to taste and availability. So, after reading a few investment books and many Boglehead conversations, it is about the time to find out what my own style is like.

I am rather risk-averse in nature, but more financially flexible than married individuals. A fixed-income-to-equity ratio of 20:80 (at 30 years old), more or less the Vanguard Diehards average, would be appropriate.

I am usually lazy. I should minimize the number of funds to hold for the ease of rebalancing.

Yet I sometimes have a great deal of curiosity. Once I get used to investing, I may allow 10% of the equity allocation to interesting vehicles such as REIT and commodities.

I presume every investor does this kind of psychological assessment, consciously or not. Am I missing any considerations about mental attitude?