Blogs & Comment

Quotable guide to passive investing (II)

Many books on passive index investing have now been published and Taylor Larimore offers an excellent guide on his Investment Gems webpage. Here is Part II of the Quotable Guide to Passive Investing. Part I can be found here.
The Bogleheads’ Guide to Retirement PlanningTaylor Larimore, Mel Lindauer, Rick Ferri & Laura Dogu
“Early retirement planning should begin when you have your first full-time job.”
“No matter what your risk tolerance is, your asset allocation should become more conservative as you approach retirement age.”
“Joint accounts are a great option for ensuring that assets are immediately available to a surviving spouse, child, or partner.”
“Count yourself lucky if you still have a defined benefit plan, but also keep in mind that it may go away in the future.”
“Variable annuities or equity-indexed annuities are products to be avoided.”
“Rather than rebalancing by the calendar, many people make changes only when their portfolio allocations are off by a certain percentage.”
“Each time you need to withdraw money from your investments, simply look at your asset percentages and take the money out of the one that is overweight.”
“Reverse mortgages should be a last resort for providing income.”
Your greatest asset is your ability to earn a living for yourself and your family.”
For younger breadwinners, term insurance is the only practical way to provide needed protection at affordable costs.”
“The more complex the product, the worse it is for you, and the better it is for the adviser.”
Certain assets, such as life insurance pass to designated beneficiaries if you die. A divorce decree will not change the designations.”
“In the real world, people lose jobs, good health turns bad, more than half of marriages end in divorce, and other setbacks occur that can ruin a good retirement plan.”
The Coffeehouse InvestorBill Schultheis
The investor who starts saving and investing $300 monthly at 8% in a retirement account at age 25 instead of age 35–ends up with an additional $604,195 in her portfolio at age 65.”
“When fear and greed aren’t controlled, buying and selling individual stocks can quickly become a miserable experience.”
“As long as Wall Street has a vested interest in lots of transactions and busy portfolios, investors will continue to latch on to the hype and hysteria of Wall Street, perpetuating the misconception that by carefully reviewing market trends, diligently studying mutual fund tables, religiously researching global economies and closely watching interest rates, anyone and everyone can own a successful portfolio.”
“Let go of the mistaken belief that the secret to a successful portfolio is to accurately forecast bull and bear markets.”
“The simplest approach to diversifying your stock market investments is to invest in one index fund that represents the entire stock market.”
“The top 35 mutual funds from 1978 to 1987 cumulatively under-performed the stock market average by 7% annually during the next ten years.”
“The most important factor when diversifying is to adhere to your asset allocation strategy, because when you stick to your strategy and rebalance your asset at year-end, buy and sell decisions are no longer arbitrary.”
Common Sense on Mutual FundsJohn C Bogle
“To invest with success, you must be a long term investor.”
“Suppress the temptation to add redundant layers of diversification.”
“After nearly 50 years in this business, I do not know of anybody who as done it (market timing) successfully and consistently.”
“When stock prices are high, investors want to jump on the bandwagon; when stocks are on the bargain counter, it is difficult to give them away.”
“The key to fund selection is to focus, not on future return–which the investor cannot control–but on risk, cost, and time–which the investor can control.”
“Backtesting, of course, should always be viewed with skepticism.”
“Choose a balance of stocks and bonds according to your unique circumstances–your investment objectives, your time horizon, your level of comfort with risk, and your financial resources.”
“Asset allocation is critically important; but cost is critically important, too. — All other factors pale into insignificance.”
“Most of all, beware of wrap accounts–packages of mutual funds assembled within a ‘wrapper’ for which an additional fee is paid.”
“The ‘Equity Risk Premium’ is the extra return required by investors to compensate them for taking the extra risk of owning common stocks rather than risk-free U.S. Treasury bonds. The average since 1802 has been 3.5%”
“The simplest of all approaches is to invest solely in a single balanced market index fund–just one fund. And it works.”
To be continued …. here.