The 5-Year-Investment-Plan Is A Template: How To Actually Invest It?

Introduction

Over one decade or so, my various articles contained a dozen of "Templates," meaning "a gauge or pattern, used in making or copying something accurately." (Webster’s Dictionary).

All Templates, except the 5-Year-Investment Plan ["5YIP"], were the portfolios with equity/bond ETFs. The 5YIP, nevertheless, is not an ETF portfolio, but it is its own Excel spreadsheets, being able to make several versions of the 5YIP for different Age Cohort (# 4 thru # 1) with different assumptions such as interest rates or investment-time dimension.

Currently, Five 5YIP Articles have been published: !) Stacking Investment Packs Or Going On Roll Off (May 22), 2) Stacking Investment Packs: An Astonishing Attainment (May 28), 3) How To Protect Bull's Nest Egg In Their Late Age (Jun. 03), 4) Late Bull's 5-Year-Investment Plan: A Numerical Illustration (Jun. 05), and 5) The 5-Year-Investment-Plan: A Real Time Or Real Money But Not Both (Jun. 13).

I have not used the term ("Template") explicitly in above Five Articles, but implicitly I thought that the 5YIP is also a Template because it can be adopted by younger investors in the same Cohort or a lower-Cohort (i.e., # 2 or # 1) investors to mimic the upper-Cohort (i. e., # 4 or # 3) investors.

Today (Jun. 13) I encountered a question in a comment:

“At the moment, I have adopted a kind of separate tranche view of my stock holdings of between a rolling 5 year [or] 20 [-] 25 [years period]. (Roth IRA) coupled with dividend and [short-]term income holdings…

Maybe you can incorporate a dividend growth layer or perspective in a future article?” (From a comment on “ The 5-Year-Investment-Plan: A Real Time Or Real Money But Not Both”, Jun. 13, italics are emphases, and some corrections are made.)

The Focus

The commenter has accomplished a variety of the long-term investing experience. The single focus is to provide an actual investment action in the 5YIP which is not specified any investment vehicle or strategy or any investment sector such as “Dividend growth or perspective”.

The article focuses on the possible investment action, which the commenter asked.

The Essence Of the 5-Year-Investment Plan [5YIP]

The 5YIP has a long-time horizon, starting 1 year (Table 1), another 4 Years, making 5 Investment Packs [IPs] (IP # 1 thru IP #5), investing $5K every month for 60 months) (Table 2), and then another 15 years (optional, shorter years or stopping, possible), without additional investment, continuing. (Table 3) (“The 5-Year Investment Plan: Real Time Or Real Money But Not Both,"Jun. 13, 2023)

The 5YIP is a vanilla investment, which doesn't have any flavor or selection. The whole structure, strategy, and progress are described by three Excel Tables, which are designed by the author.

The 5YIP has a dual target: 1) Protect investors in case of a Great Market Crash [GMC], unfortunately, at any time during the whole 20 years (maximum) period. 2) The Nominal money which is not affected by the market plunge, so, as purely a byproduct, the 5YIP gives investors a great opportunity, by allowing investors to buy some deeply descended equities or ETFs.

Nominal Money vs. Real Money

The “stock” is Real money at the point of time in a Profit-and-Loss Statement, so it changes every time.

The “flow” is Nominal money at the unit of time (i.e., one year) in a balance sheet (or 20 years in the “5YIP” in my article), which is constant during the entire period of analyses.

This distinction between two different money - Nominal money vs. Real balance – is the fundamental concept of the monetary theory of Professor Milton Friedman, who received the Nobel Prize in Economics in 1976.

Most readers know that the current dollars erode the value year after year, so they reach half of Real dollars in 18 years under 4%, according to the "72 Rule."

Consequently, they are immune from the illusion of money.

How To Invest with the 5YIP

The 5YIP is still a "Template", meaning we do not have any financial institution offers the service of it yet

Currently, Goldman Sachs online Savings account pays 4.15% annual percent rate [APR], daily compounded, and the Federal Deposit Insurance Company [FDIC] protected up to $250K each account, so we can "Invest" $5K every month for 5 years (60 months).

It's going to be a proxy, but a good way of the 5YIP because Goldman Sachs Bank is a reliable major bank.

Albeit the current rate (4.15%) will not be constant in the future, your investment will not be off rail, considering in the foreseeable future, the rate will remain a 3% - 4% range.

Concluding Remarks

The smooth and safe network between all accounts – Brokerage, online savings, and checking - is the cornerstone to succeed in the current online environment.

Consider ACH (Automatic Clearing House) Bank Transfer:

“Money transfer between Charles Schwab Checking Account and two Goldman Sachs Bank’s online Savings Accounts through ACH that seems not to be known broadly, but it is the most secured, fast, and free money-transfer service, provided by the U.S. government.”

(From “A Single System With The C/C Ratio And The Shadow A-A Decision” Oct. 13, 2022)

Explaining the 5YIP step by step would help my fellow investors of all age cohorts # 4 thru #1. Moving from younger Cohort to older Cohort is easy, by simply changing some parameters such as interests or investment time length (i.e., from 20 to 10 if you are too old).

I do not say the 5YIP is optimal, but going with a guide would be much better than with no guide.

I need your feedback as much as possible.