What were the little things that led you to index investing?

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Robert C F
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What were the little things that led you to index investing?

Post by Robert C F »

One image that stuck in my mind and helped me realize something was wrong with where my "financial advisor" at Fidelity was leading me was his Rolex watch. Started wondering why this 30 something guy would spend so much on an overpriced watch and presume to give me financial advice. I was 20+ years his senior and had never spent that much on a luxury item with the need to save for retirement.

Then I started reading -- thanks Bogleheads, Bogle, Ferri, Bernstein and Swenson, best money I ever spent on books -- moved my money and committed to the index approach.

What was your intangible, aha moment, or little thing that led you toward indexing?
chaz
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Re: What were the little things that led you to index invest

Post by chaz »

The little things were the low ERs.
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cheese_breath
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Re: What were the little things that led you to index invest

Post by cheese_breath »

A little book called Investing for Dummies.
The surest way to know the future is when it becomes the past.
MoonOrb
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Re: What were the little things that led you to index invest

Post by MoonOrb »

I read The Investment Answer by Dan Goldie and Gordon Murray and was like, "Okay, this sounds good," and read one of Jack Bogle's books next and then made the switch immediately.
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G-Money
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Re: What were the little things that led you to index invest

Post by G-Money »

It was simple math for me.

When I started out, I knew that I knew nothing about investing. As I was reading about mutual funds, I came across a description of an index fund--average returns with below-average costs. For someone who knew he didn't know what he was doing, this was immediately appealing.

Found the old Diehards forum shortly thereafter, which filled in the nitty-gritty details.
Don't assume I know what I'm talking about.
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FelixTheCat
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Re: What were the little things that led you to index invest

Post by FelixTheCat »

I read an article telling me most active fund managers couldn't beat the benchmark. So I eventually found the Bogleheads and became an index investor.
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livesoft
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Re: What were the little things that led you to index invest

Post by livesoft »

In the 1990's one of the funds with the best performance was Vanguard's S&P 500 index fund. That is, large-cap growth funds kicked butt. If one was performance chasing, they bought VFINX.

So rather than a little thing that led to index investing, a big thing beckoned.
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Sally
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Re: What were the little things that led you to index invest

Post by Sally »

Watching TSP investments which took no work, research, or action other than investing; spouse died & I had to handle everything; but most of all....the desire for simplicity especially as I age.

OR as the saying goes, less is more......who need to own a lot of different things.
MnD
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Re: What were the little things that led you to index invest

Post by MnD »

Seeing that active funds had ER's that were often consuming 50% or more of the funds dividend income year in year out.

Exhibit A:
Royce funds had an good reputation for small cap value funds, but has some funds where costs consume ALL dividend income.

Royce Opportunity Fund in 2012:
Total income $20,344,399
Total expenses $20,242,360
Net investment income $102,039
:shock:
70/30 AA for life, Global market cap equity. Rebalance if fixed income <25% or >35%. Weighted ER< .10%. 5% of annual portfolio balance SWR, Proportional (to AA) withdrawals.
khh
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Re: What were the little things that led you to index invest

Post by khh »

Not exactly little, but when I saw Jack Bogle on WSW, it was like the light bulb came on. I think this was in early 1984.
Twins Fan
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Re: What were the little things that led you to index invest

Post by Twins Fan »

Finding the bogleheads website!!

I just started investing last year. At the beginning, I was reading up on everything from individual stocks, to hedgefunds, to active managed mutual funds, and all kinds of things inbetween. Thankfully, I came across the bogleheads forum!! The more I read on this forum, the more indexing made sense, and I saw how it even fit my personality more than the "flashy" styles. Yes, I'm boring. :D
Woodshark
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Re: What were the little things that led you to index invest

Post by Woodshark »

I read Andrew Tobias's book "The only investment guide you will ever need" many, many years ago. That got me started.....somewhat. Then a few years after that I was reading books by Jane Bryant Quinn and Jack Bogle. That firmed things up and got me most of the way there. Finding this forum and doing a LOT of research finally cemented the whole concept for me. Now I'm a three fund guy with a little slice & dice.
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Bogle101
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Re: What were the little things that led you to index invest

Post by Bogle101 »

My Dad told me !
40% Extended Market | 40% S&P 500 | 10% REIT | 5% State Muni Bond | 5% Cash
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Aptenodytes
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Re: What were the little things that led you to index invest

Post by Aptenodytes »

A few things clicked, in ratchet manner.

+ When I had my first academic job the only choice was TIAA-CREF, and their most popular funds were pretty close to passive indexing (if not entirely). So I got into the habit involuntarily, to a degree.

+ Around the same time I was at a meeting sitting next to Paul Kennedy who had just published a dire book about the future. He happened to mention that he had his retirement money invested fully globally, because he had no basis for knowing which country would do best. Prior to that I had allocated some international money more or less randomly -- the idea of systematically matching global market caps hadn't occurred to me before then.

+ Fast forward quite a bit, and I'm still invested in the TIAA-CREF family of funds but my university opens up the Vanguard funds as a new option. It sits in the back of my mind but I don't act on it because I don't fully understand what's at stake.

+ I engage in the equivalent of picking up a book next to the one I'm looking for in the library stacks: I read a post on David Roodman's blog which I normally read because of its main subject matter. But this post is off-topic and is all about investing in index funds and how to exploit the Fama-French factors. The post made reference to Vanguard's low fees and range of index funds that do a passable job at tracking the F-F factors (something TIAA-CREF funds do not do). I believe the post also made reference to the Boglehead forum, where Roodman used to post though I haven't seen him here lately.

+ Having had the door opened a crack by the serendipitous Roodman post, I entered and read widely, and quickly drank the full Kool-aid. I transferred everything to Vanguard, worked up an AA with help from people here, and that was that.
Middle
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Re: What were the little things that led you to index invest

Post by Middle »

I was minding my own business downtown, when I looked up and saw a copper awning that had oxidized into the exact pattern of Jack Bogle's face. The clouds parted and the angels sung to me about the long term costs of high expense ratios.
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Re: What were the little things that led you to index invest

Post by whaleknives »

Researching a 401(k) without index funds, trying to pick the best funds and watching them revert to the mean, and then reading Andrew Tobias and John Bogle.
"I'm an indexer. I own the market. And I'm happy." (John Bogle, "BusinessWeek", 8/17/07) ☕ Maritime signal flag W - Whiskey: "I require medical assistance."
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CABob
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Re: What were the little things that led you to index invest

Post by CABob »

I used to be a regular listener to Bob Brinkers radio show and he was a proponent of Vanguard and especially the TSM fund so when I had some money to invest I opened an account with Vanguard and the TSM. Sometime after that I discovered the Diehards forum on M* and when I retired I rolled over my 401k to Vanguard and allocated with the help of several forum posters.
Bob
playtothebeat
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Re: What were the little things that led you to index invest

Post by playtothebeat »

First "investment" book I ever read was Bogleheads Guide to Investing, and was immediately hooked. At that point, I knew basically nothing about investing, other than a college class or two on the broader finance topics. Then I read Random Walk Down Wallstreet.

After reading those books, I'm not sure I can ever look at an actively managed fund and say "yep, it's better than an index".
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Re: What were the little things that led you to index invest

Post by Grt2bOutdoors »

Listened to a few diferent radio shows, the Dolans, Bob Brinker, Bill Bresnan, read Money Magazine, read Bogle on Mutual Funds. Got tired of paying higher fees for uneven performance and tired of constant manager changes.
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Re: What were the little things that led you to index invest

Post by YttriumNitrate »

deleted.
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playtothebeat
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Re: What were the little things that led you to index invest

Post by playtothebeat »

YttriumNitrate wrote:My horrendously bad luck at picking individual stocks...
"bad luck". nice.
enderland
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Re: What were the little things that led you to index invest

Post by enderland »

Twins Fan wrote:Finding the bogleheads website!!

I just started investing last year. At the beginning, I was reading up on everything from individual stocks, to hedgefunds, to active managed mutual funds, and all kinds of things inbetween. Thankfully, I came across the bogleheads forum!! The more I read on this forum, the more indexing made sense, and I saw how it even fit my personality more than the "flashy" styles. Yes, I'm boring. :D
Pretty much exactly my situation. I started with Financial Peace University then got into the "so what do I do next" question and somehow Google brought me here :happy
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Tycoon
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Re: What were the little things that led you to index invest

Post by Tycoon »

In early 1990s I was fortunate enough to read the book Making the Most of Your Money by Jane Bryant Quinn. In the book she suggested the Vanguard Index 500 fund as a low cost solution to the many loaded funds available at the time. I took her advice and never looked back.
Emotionless, prognostication free investing. Ignoring the noise and economists since 1979. Getting rich off of "smart people's" behavioral mistakes.
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evenkeel
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Re: What were the little things that led you to index invest

Post by evenkeel »

The first hint that there might be a better way came from a short conversation with my father.
I mentioned that my husband and I met with a financial adviser and (among other things) took out a variable life insurance policy.
My dad just said "yep, I fell for one of those once, too."

That scared me into doing the research I should have done before.
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SHL
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Re: What were the little things that led you to index invest

Post by SHL »

khh wrote:Not exactly little, but when I saw Jack Bogle on WSW, it was like the light bulb came on. I think this was in early 1984.
Me too!
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noyopacific
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Re: What were the little things that led you to index invest

Post by noyopacific »

In 1993, I was reading the annual report from our investment adviser. The returns had been disappointing for the previous 4 years but the personalized reports were very, very nice! They were in full color with lots of charts and graphs printed on an elegant quality of paper and bound in a very nice folder for us to keep in our own personalized binder. Then it finally dawned on me, it has to cost them a fortune to provide all this stuff. Until I realized it probably cost them nothing at all, the fortune it was costing was more likely mine! (I later figured that between our financial planner, the fund advisory service, an expensive IRA account trustee, and actively managed fund expenses, we were paying almost 3% more than it cost us in invest in index funds.)
:oops:

One of the first books I read was The Handbook for No-Load Fund Investors by Sheldon Jacobs. He didn't make an especially strong case for Vanguard Index Funds but shortly after learning about them, I realized they would be exactly the right choice for me. No more hoping I would find a smart manager, I could just take the "average" and quit worrying about finding that elusive wizard with the Midas touch.

After 20 years I have to say that what we ended up with however, was so much better than "average!"
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Re: What were the little things that led you to index invest

Post by PB »

A typical (sad) story... I was with Wells Fargo Investments and my 'Advisor' recommended I purchase a basket-linked CD, a Wells Fargo one at that. Then he recommended a corporate bond, without telling me it was secondary market and there was a $450 purchase fee. Eventually, he tried to sell me a variable annuity, another relatively complex and not always transparent asset. I started reading about those, and it finally dawned on me... I was the sucker at the table. So I became determined to educate myself, found my way to Bogleheads.org, the Boglehead's Guide to Retirement, Bernstein, Ferri and Swedroe... and the rest is history 8-)
cheesepep
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Re: What were the little things that led you to index invest

Post by cheesepep »

I don't do index investing. I do dividend growth investing, and it has worked wonderfully well for me. I enjoy the experience. But what got me into dividend growth investing was the constant loses of trying to time the market (and sometimes day trading) individual stocks. Now, I just buy and hold and buy on the dips (and collect the huge dividends).
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bottomfisher
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Re: What were the little things that led you to index invest

Post by bottomfisher »

Chapter 9 Bogle on Mutual Funds copyright 1994
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Re: What were the little things that led you to index invest

Post by jane1 »

Trial and error.
Tried individual stock picking. Lost a lot of money. Tried market timing, didn't work. Selected MFs based on past returns, sector funds based on "hot" sectors, "tips" from experts. Tried my hand at Options. Read several good investments books.
Everything turned out to be a lot of work and lot of time spent researching, tracking, etc and probably returns that were significantly less. Portfolio was going out of hand where we had no idea how our individual investments were doing.
All along had part of the portfolio in Index funds and began to appreciate their simplicity and low cost. Discovered Bogleheads wiki. Now we can't believe we missed the obvious for so long!
MN Finance
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Re: What were the little things that led you to index invest

Post by MN Finance »

Arguing ad nauseum with diehard regulars on the M* board in the late 90s.
Mill
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Re: What were the little things that led you to index invest

Post by Mill »

+1 vote for Tobias book the only investment guide you'll ever need. Plus a personal friend of mine who is a member of these boards.
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wlpotts
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Re: What were the little things that led you to index invest

Post by wlpotts »

A little of luck, that turned into greed, that ultimately turned towards knowledge.

To the OP question, when I received a statement summary that deducted a 4.5% ER from a fund I elected to invest in. :oops:

I got lucky in 1981 when I was introduced to Vanguard and investing as a youngster at 21 years of age. I didn't have enough investable money to be able to invest in any organization or fund at that time, but Vanguard allowed be start an account with a minimum amount of $1000.00. I was able to begin my start in investing with the STAR fund.

As soon as I acquired the required minimum amounts to diversify into index funds I did so, since the difference in ER's was so much more reasonable.

The education and support that Vanguard provided me along the way has been the backbone of my investing experience. Yes, I've gotten greedy and have gone off track with the media hype; the what's hot & what's not syndrome, but the Vanguard mantra of passive and balanced index investing has always proved to serve me well over the past 32 years.

If you really want to stray into more risk, stray with <5% of your portfolio.

Best to all of you!
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lawman3966
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My Five Stages of Indexing

Post by lawman3966 »

Around 2000 or 2001, I heard someone interviewed on CNBC (can't remember for sure whether it was J. Bogle or not). When asked for his recommendations, he said, in effect, "the whole U.S. stock market is good; so you should own all of it."

This statement haunted me, as it was so contrary to the stock-picking, beat-the-crowd, market-timing culture of the investment media that I was used to. I didn't want to believe it. It it were true, all the time I'd spent learning about the copper mines of Chile, and the semiconductor industry in Taiwan would have been wasted, which was unacceptable. Those studies had to be worthwhile; they HAD to be!

I think I went through various stages of acceptance of this logic, analagous to Kubler-Ross's five stages of grief. I think I reached acceptance gradually by about 2006 or so.
I started trading less; cut down on the buying of individual stocks; and gradually began to consolidate my holdings into index funds.

I finally got around to reading Common Sense on Mutual Funds in 2007, and thereafter started consuming various other books in this genre: Malkiel, Swensen, and Bernstein (who is probably my favorite author - the most blunt).

I wish I'd known earlier, but am grateful to have found out when I did.
Cunobelinus
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Re: What were the little things that led you to index invest

Post by Cunobelinus »

For me, I think it was Chapter 4 or 5 in The Intelligent Investor regarding the defensive (passive) investor. I made a brief foray into the enterprising (active) investor chapters and realized it was way too much for me. I ran across Vanguard some time shortly after, and several years later I found Bogleheads.org.
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stemikger
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Re: What were the little things that led you to index invest

Post by stemikger »

Reading Commonsense on Mutual Funds did it for me. Also, The Bogleheads Guide to Investing and other authors I highly respect all seem to be on the same page when it comes to index funds.

I also don't like to do research which you have to with managed funds. I don't want have to keep track when a manager is leaving.

Oh and the most important reason: THE COSTS!!!
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aquifer
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Re: What were the little things that led you to index invest

Post by aquifer »

I had money at Edward Jones in a Roth IRA. I knew I was paying a sales charge and noticed that it generally took several years of earnings to gain back that sales charge. After that, according to the charts on the EJ site, my fund performed almost exactly like the S&P 500 index. For some reason I began to wonder why you can't just invest in the 500 index and skip the middleman. Turns out you can. So I did. I read a book by Mike Piper followed by books from Rick Ferri and John Bogle. I was convinced, and immediately did a transfer of assets from EJ to Vanguard, and transferred my 401k holdings to a Vanguard TR fund that was available in my plan. I discovered this site and continue to learn about investing by reading many of the posts here. I am very happy and comfortable with my decision.
novatrixs
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Re: What were the little things that led you to index invest

Post by novatrixs »

Growing up I was always taught about the importance of saving for retirement, but never much about the underlying mechanisms. After hearing the stories of the many people who got burned in the market crash, and in preparation for my first job, I decided I'd read every book I could get my hands on related to finance. Many advocated passive investing, but probably the one that influenced me the most at the time was a general personal finance book called "I Will Teach You to Be Rich" by Ramit Sethi.
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Re: What were the little things that led you to index invest

Post by Tortoise »

During the roaring '90s, I thought I was the best investor I knew. I had annual returns >100% in 1998 and 1999. After picking up the pieces of my portfolio in 2002, I realized I had been gambling and only knew enough about investing to be dangerous. There had to be a better way. I started to read and learn. I wrote an investment blog in 2008 that focussed on investing, LBYM, and frugality. I became aware of John Bogle and the bogleheads while researching for the blog. One of my favorite books is John Bogle's Little Book of Common Sense Investing. I saw the light at that point and moved from actively-managed mutual funds to low-cost index investing in 2008.
"Always do right. This will gratify some people, and astonish the rest." --Mark Twain
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FabLab
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Re: What were the little things that led you to index invest

Post by FabLab »

The ineluctable sense of the thing.
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Texas hold em71
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Re: What were the little things that led you to index invest

Post by Texas hold em71 »

+1 Andrew Tobias; wish I had read it 20 years earlier. Don't want to think about how much I spent in expenses in that time.

If I had been presented with a bill for the expenses instead of having them netted against the returns, how much do you want to bet I would have figured it out a lot sooner?
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Re: What were the little things that led you to index invest

Post by Myrddraal »

My first post in this forum.

I guess it's just luck. My company vests RSUs using Schwab, and provides 401(k) with Vanguard. I invested in a few stocks in my Schwab account. A few years ago I decided to get serious with investing. I read "Charles Schwab's New Guide to Financial" to get started. Then I thought: since my 401(k) is in Vanguard, I wonder if their founder wrote books like Charles Schwab did? I didn't even have any idea what kind of company Vanguard really is back then.

A quick search in Amazon led me to the book "Common Sense on Mutual Funds". I read it...and you can guess the result. Rarely in my life there's such a eye-opening experience.
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Re: What were the little things that led you to index invest

Post by Bull Moose »

Google's search algorithm kept leading me to this site when i typed in searches related to personal finance. The discussions were always interesting, so after 8 or 9 times, I figured this site was worth looking at in a more thorough manner so i read the wiki.
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BHCadet
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Re: What were the little things that led you to index invest

Post by BHCadet »

The thing is I didn't know I was wrong about investing all this time.
I was in a midst of reading investment articles chasing the latest hot tips when Forbes had top financial web sites of the year listing.
I followed each one of them till I saw Bogleheads.org.
The rest is history...
dhodson
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Re: What were the little things that led you to index invest

Post by dhodson »

For me it was the insurance industry. I was being abused and once I realized what was going on, it put me on a search for the best strategy. It isn't intuitive that professionals under perform indexing when including costs.
spencer99
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Re: What were the little things that led you to index invest

Post by spencer99 »

I was clueless and frustrated with an ever-present anxiety that there were smart investments I was missing, some smart move I should be making. John Bogle was a guest on a radio program. The clarity of his vision: "own the economy, stay the course" just resonated. I started to look into it and somehow (probably the name association) ended up on bogleheads. The forum conversation, its reading recommendations, and the kind, wise advice of members firmly entrenched me in a slightly modified three-fund index approach. Anxiety gives way to calm, confidence, control. It's been a good trip.
Dandy
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Re: What were the little things that led you to index invest

Post by Dandy »

Wm Bernsteins' 4 Pillars of Investing. Was in the mutal fund industry on a business trip. Picked up his book at the library for reading on the flight. Wow - not only outlined an approach but the rationale -- hit home. Read it again 6 months later. Also the Boglehead's guide to investing. But the little thing that became the big thing was the rationale - I didn't have to listen to the media or "experts" in fact I should ignore them.
scrabbler1
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Re: What were the little things that led you to index invest

Post by scrabbler1 »

Back in 1986 when I first began investing in my old 401(k), we had only 2 funds to invest in - a Stable Value fund and an S&P500 fund. Our company picked up the expenses in the former while the latter had its low expense ratio so it was hard to go wrong - only if you branched out into other (costlier) funds when the company changed plan administrators in the 1990s. I branched out a little bit but always kept a good amount in both funds, even after I left the company and did a direct rollover into a TIRA.
jginseattle
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Re: What were the little things that led you to index invest

Post by jginseattle »

No little thing. Bogle on Mutual Funds.
deadlymonkey
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Re: What were the little things that led you to index invest

Post by deadlymonkey »

I had started with the TSP right away, but a senior NCO pointed me towards First Command. I sat through the briefing but it all seemed so shady, and the advisor was kind of hot and flirty, so I only invested the minimum with them, way below what they wanted. A few months later I kicked myself and stopped investing with them and kicked my TSP up to 20% of my paycheck. Which incidently i recently logged onto first command and saw that I do still have about 3K in a roth with them. Their online services seem to be nonexistant. How can I go about rolling that over into my Vanguard Roth?

Several years later I was asking for financial advice on another forum and got pointed here, tweaked my AA bit, opened a vanguard Roth for myself and my wife, and a 529 for my kid. Still cranking away at that 20% for the TSP which maxes out my contribution for the year.
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