Blogs & Comment

Quotable guide to passive investing (III)

Taylor Larimore offers a guide on the Investment Gems webpage to the literature on passive index investing. Here is Part III of the Quotable Guide to Passive Investing, a condensation ofhis work. Part I can be found hereand Part II here.
EnoughJohn C Bogle
“Not knowing what enough is, subverts our professional values. It makes salespersons of those who should be fiduciaries of the investments entrusted to them.”
“In 2007 alone, the 50 highest-paid hedge fund manager together earned $29 billion (yes, billion). If you didn’t make $360 million in that single year, you didn’t even crack the top 25.”
“Today, if fund managers can claim to be wizards at anything, it is in extracting money from investors. In 2007, the direct costs of the mutual fund system totaled more than $100 billion year after year paid by the investors themselves.”
“It is essential that we demand that the financial sector function far more effectively in the public interest and in the interest of investors than it does today.”
“The 2003 failure of Arthur Anderson, and the earlier bankruptcy of its client Enron, was but one dramatic example of the consequences of this conflict-riddled relationship.”
“In 1980 the compensation of the average chief executive officer was 42 time that of the average worker. Since then it has risen to 520 times.”
“Until we pay CEOs on the basis of corporate performance rather than on the basis of corporate peers, CEO pay will, almost inevitably continue on its upward path.”
“Nearly 2,800 of the 6,126 mutual fund that existed in 2001 are already dead and gone.”
The ETF Book : All You Need to Know About Exchange-Traded FundsRick Ferri
“It is prudent to dig deep into the indexing methodology so that you can make an informed investment decision about the ETFs you are interested in.”
“There are four methods of capitalization weighting used by index providers: full cap, free-float, constrained, and liquidity.”
“Beating the market is not just achieving a higher return — risk adjusted returns are a more sophisticated approach to measuring the performance of a portfolio or fund.”
“To be a successful passive investor, you need to have an unwavering belief that the strategy will work in the long-term.”
“The correlation between asset classes change, sometimes frequently and suddenly.”
“During a time of crisis, the correlation between major asset classes increase, for example, global stocks.”
“If an investor wants to take more risk and explore other options, a core and explore strategy is a good compromise between passive and active management.”
“The key component for starting to accumulate wealth is savings consistency. Ideally, a young person will start a savings plan at the same time he lands his first job.”
“If done successfully, tax loss harvesting will increase an investor’s after-tax returns.”
The Four Pillars of InvestingWilliam Bernstein
Anyone promising high returns with low risk is guilty of fraud.”
“Stock picking and market timing are expensive, risky, and ultimately futile exercises.”
“A prudent course is to make the broad market and a lesser amount of small U.S. and large foreign stocks your core stock holdings.”
“Financial history provides us with invaluable wisdom about the nature of the capital markets and of returns on securities.”
“The message to the average investor is brutally clear: expect at least one, and perhaps two, very severe bear markets during your investment career.”
“Most investors are simply not capable of withstanding the vicissitudes of an all-stock investment strategy.”
“A young person saving for retirement should get down on his knees and pray for a market crash, so that he can purchase his nest egg at fire sale prices.”
To be continued … here.