Blogs & Comment

Quotable guide to passive investing (VI)

Here is Part VI of the Quotable Guide to Passive Investing. Part I is here. To scroll through Parts II to V, click on links at the bottom ofeach page.
The Investor’s ManifestoWilliam Bernstein
“Wall Street is littered with the bones of those who know just what to do, but could not bring themselves to do it.”
“Very high returns are almost always made by those brave enough to invest when the sky is blackest.”
“Many investors lean heavily on past returns to gauge future ones. This is a mistake.”
“No risk matters more to investors than that of running out of assets before they die.”
“The most spectacular example of luck masquerading as skill was the recent case of William Miller, skipper of the Legg Mason Value Trust.”
“Mr. Buffett is not so much a money manager as a businessman.”
“The Morningstar database suffers from so-called ‘survivorship bias,’ meaning that hundreds of poorly performing funds have disappeared from their fund universe, all of which would have underperformed the index funds.”
“Over the long haul, the differences in the amount of wealth provided by different stock asset classes can vary enormously, and owning all of them helps minimize your chance of dying poor.”
“The investor should forget trying to pick stocks and mutual funds or to time the market. The best the investor can do is to maximize returns by minimizing expenses.”
“Age is the first factor determining the overall stock/bond allocation. Investor risk tolerance is the second.”
“The most important asset allocation decision is the overall stock/bond mix. Start with the age=bond allocation’ rule of thumb.”
“Be highly skeptical of sophisticated ‘black box’ methods of asset allocation.”
“China as had one of the world’s highest economic growth rates, yet between 1993 and 2008 its stock market has lost 3.31 percent per year.”
“Nations with the most rapidly growing economics quite often have the lowest stock returns.”
“Nothing last forever: more often than not, recent extraordinary economic and financial events tend to reverse.”
The sooner you turn off CNBDC, get out into the bright sunshine, and take a walk, the sooner you’ll feel better about your investments.”
“You’re not going to impress the crowd at your country club by telling them you own shares of an index fund. Let them laugh; the joke’s on them.”
“If you’ve never been tested before, I strongly urge that you encounter your first bear market conservatively invested.”
“The most important investment ability of all is emotional discipline.”
“Do not invest with any mutual fund family that is owned by a publicly traded parent company.”
“Most retirees should purchase ‘longevity insurance’ by postponing Social Security until age 70, and perhaps by adding a commercial immediate fixed annuity as well.”
“In general, variable annuities come wrapped in enormous fees and are offered by insurance companies, that as a group constitute some of the worst players in the financial business.”
“Rebalance your portfolio approximately once every few years.”
The Lazy Person’s Guide to InvestingPaul Farrell
Investing really is very simple stuff. You can do it yourself.”
“Lazy portfolios are keep-it-simple, no-hassel, low-stress, time-saving, low-maintenance portfolios–so you can get on with the business of everyday life.”
“The only solution is to be in the market all the time and stop jumping in and out.”
“In a study of 66,400 Merrill Lynch investors, professors Odean and Barber discovered that buy and hold investors actually beat the more active investors by a fairly sizeable margin, 18.5% to ll.4% over a six-year period.”
“You don’t need to complicate your life–just stick to the basic Scott Burns Couch Potato Portfolio (50% S&P/50% Total Bond Market) with no stress, except your little ten-minute annual rebalancing efforts.”
“Taxes, Time, and Psychology favor the laziest portfolios.”
“A penny saved is a dollar earned, thanks to compounding.”
“Charles Schwab says that for every five years you wait to start saving for retirement, you’ll have to double your annual savings.”
“Kahneman was asked by a CNBC anchorman the day afer his Nobel was announced what investment tips he had for viewers. He responded, ‘Buy and hold.'”
“Experience has taught me that the relentless noise from breaking news sources, like CNN and CNBC, easily distracts most investors from what really works in the long run.”
“Where does Fama invest his retirement money? In index funds. Mostly the Wilshire 5000–.”
“Perhaps the most amazing insight I got out of this review of the investment habits of Nobel laureates is the simplicity of their investing strategies.”
The Little Book of Common Sense InvestingJohn C. Bogle
“Index funds eliminate the risks of individual stocks, market sectors, and manager selection. Only stock market risk remains.”
“Common sense tells us–and history confirms-that the simplest and most efficient investment strategy is to buy and hold all of the nation’s publicly held businesses at very low cost.”
“The brokers, the investment bankers, the money managers, the marketers, the lawyers, the accountants, the operations departments of our financial system are the only sure winners in the game of investing.”
“The lower the costs that investors as a group incur, the higher rewards that they reap.”
“Common sense tells us the obvious; while owning the stock market over the long term is a winner’s game, beating the stock market is a loser’s game.”
“We investors as a group get precisely what we don’t pay for. So if we pay nothing, we get everything.”
“It’s amazing how difficult it is for a man to understand something if he’s paid a small fortune not to understand it.”
“Investment of $10,000, 1980-2005:
Index Fund….Managed Fund $179,200…….$179,200…….Gross Return $170,800………$98,200…….Pre-Tax Return $149,000………$61,700…….After-Tax Return $65,000………..$23,100…….After Inflation Return”
“Don’t look for the needle–buy the haystack”
“The average fund portfolio manager lasts just five years.”
“Of the 355 equity funds in 1970, fully 233 of those funds–almost two thirds–have gone out of business. Only 24 outpaced the market by more than one percentage point a year–one out of every 14. Let’s face it: These are terrible odds!.”
“A mutual fund portfolio continuously adjusted to hold only Morningstar’s five-star funds earned an annual return of just 6.9% between 1994 and 2004, nearly 40 percent below the 11.0% return of the Total Stock Market Index.”
“Of the 35 newsletters (tracked by Hulbert) that existed in 1980, only 13 are still in business today. Only 3 outperformed the market.”
“Index funds endure, while most advisers and funds do not.”
To be continued …. here.