Now here’s a thought. Many ODs are brave entrepreneurs. A new location? Let’s evaluate, and go for it. Some new equipment at a high price tag? We’ll show our strength to the community, and it’ll be great. How about that marginal insurance plan? We’ll take it for now, and make it work.

Why, then, do we tend to be timid and kowtow to high-fee investment vehicles?

How many paychecks? You can say whatever you want about building total assets, but the focus (and action) should be directed towards building an income stream at low cost. This means dividends, interest, and rental income. Simplistically, you have to look at your biweekly personal cash flow. You need 26 paychecks per retirement year, which must be developed at a palatable cost.

I am not a rich guy. I have simply gotten the best out of my resources without taking undue risk. OK, so that describes the last 10 years, and I wish I had learned sooner. In prior years, I had relatively high fee mutual funds and took chances on individual stocks that I did not understand.

Why the change?

Two books have made all the difference. One is an old one by Merrill Lynch’s marketing department, called “Grow Rich Slowly.” The second is the famous “The Intelligent Investor” by Benjamin Graham. It’s even older. Both espouse the benefits of conservative, low-risk equity purchases in a balance that makes sense. It’s changed how I do things.

Do I beat the S and P 500?

Most of my accounts do not. But, my dividend yield is about three-quarters of a percentage point higher than the S and P. THAT is where the action is. Look for stocks that raise dividend consistently, and buy them.

Are you going to get burned on individual stocks? You bet. Are you going to get burned on individual stocks within mutual funds? You bet, only you won’t know it. If you are going to grind on your mutual funds that hard, you might as well lower your costs and go for the individual stocks. It’s what I’ve done, and here is how:

Go to the New York Times list of “Largest Stocks,” published every Sunday morning. Buy them, one by one, at a low-cost broker like Fidelity. These are names that you know, and yes, it will take a bit of work. You might edit out the ones that don’t pay dividends, as I have, with the exception of Amazon.

Of course, you’ll protest: “My index fund only charges 0.2%. How can you compare to that?” Well, a one-time $4.95 fee is 0.5% of a thousand dollar investment, and you only pay it at entry, and upon exit. Your mutual fund fees, even on the index funds, are charged yearly. Given that you will need a seven-figure savings sum to retire comfortably, that yearly mutual fund dinger can really add up. (Quick math tells me that 0.2% of your million dollar balance is two thousand dollars. Yearly. It hurts!)

I did a calculation on this method and found that the 20 largest stocks represent about 30% of the capital in the S and P 500. My return was within 1% of the S and P’s return for that year. So, I’ve effectively designed my own mutual fund at much less cost.

Then next question is asset allocation. How much principal do you devote to Potter’s Scheme? As a student of the Benjamin Graham book, I know that Graham advised 25 to 75% of your investment assets be allocated to stocks, and the converse in cash and debt instruments, namely CDs and bonds. My own choice is to be on the aggressive side, with 75% in stocks, albeit mostly conservative ones. Needless to say, this excludes the 6-month cash reserve we should all keep, as well as your private home.

Now, back to the “paychecks” idea.

As I don’t have a pension, I know that I need to generate 26 paychecks yearly, for the rest of my life. The plan is to generate 21 of them via 21 solid, dividend-paying stocks. Two will come from slowly cashing out principle on non-dividend paying stocks, including Amazon. Three paychecks will come from a “ladder” of bonds and CDs.

Your mileage may vary.

It’s a hard calculation, as I am not sure how social security will figure in. For now, I am leaving this benefit out of the mix. And, how much do you want to leave to your heirs? I’d like to leave as much as possible, which means attaining assets that I don’t have to draw against significantly.

Notice that I’ve not added real estate into my own mix. I’m not confident in investment real estate, and the tax climate makes New Jersey real estate a suspicious venture. For those of you who are, just remember to balance cash equivalents against these assets.

My bottom line is that it doesn’t have to be all that difficult or expensive. Time has a way of evening out stock market performance, and the conservative income-producing individual stock portfolio should be part of any investment plan. You’ll thank yourself, as will your heirs!