Boglehead Rules Of Thumb To Investing?

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Nerdicus
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Boglehead Rules Of Thumb To Investing?

Post by Nerdicus »

I am just wondering what you personally would consider to be the overall Bugleweed rules of thumb to investing? I know this is a broad question since there are so many aspects to investing (age, income bracket, etc). But I’d like to narrow it down to the basics. Judging from all of the posts I’ve read, the 7 reasons below seem to be mentioned quite often. Let me know if I missed anything.

1.) You shouldn’t time the market
2.) The three-fund portfolio
3.) Invest in index funds
4.) Buy and hold & stay the course
5.) Invest just enough in your 401(k) to get the company match
6.) Have an emergency fund with 6 months worth of savings
7.) Live within you means and pay down/off your debt

Note: I wasn’t sure if I should mention dollar cost averaging vs. lump sum investing and rebalancing though, but if you’d like to give your take on these then go for it.
harikaried
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Re: Boglehead Rules Of Thumb To Investing?

Post by harikaried »

1 Develop a workable plan
2 Invest early and often
3 Never bear too much or too little risk
4 Diversify
5 Never try to time the market
6 Use index funds when possible
7 Keep costs low
8 Minimize taxes
9 Invest with simplicity
10 Stay the course

Stolen from http://www.bogleheads.org/wiki/Boglehea ... philosophy
basspond
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Re: Boglehead Rules Of Thumb To Investing?

Post by basspond »

Nerdicus wrote: 5.) Invest just enough in your 401(k) to get the company match
Change to "At least invest enough"
Dandy
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Re: Boglehead Rules Of Thumb To Investing?

Post by Dandy »

Bugleweed ? late night typo/thinko?

Age in bonds?
Expenses (investment) matter?
Wagnerjb
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Re: Boglehead Rules Of Thumb To Investing?

Post by Wagnerjb »

Nerdicus wrote:I am just wondering what you personally would consider to be the overall Bugleweed rules of thumb to investing? I know this is a broad question since there are so many aspects to investing (age, income bracket, etc). But I’d like to narrow it down to the basics. Judging from all of the posts I’ve read, the 7 reasons below seem to be mentioned quite often. Let me know if I missed anything.

1.) You shouldn’t time the market
2.) The three-fund portfolio
3.) Invest in index funds
4.) Buy and hold & stay the course
5.) Invest just enough in your 401(k) to get the company match
6.) Have an emergency fund with 6 months worth of savings
7.) Live within you means and pay down/off your debt

Note: I wasn’t sure if I should mention dollar cost averaging vs. lump sum investing and rebalancing though, but if you’d like to give your take on these then go for it.
Here are my comments, as I don't agree with all the items on your list.

2. Some people prefer simplicity....or have a simple scenario of assets. That doesn't make a simple three fund portfolio superior for all. The three fund portfolio is probably inferior for most people.

3. Invest in low-cost passive funds

4. Set an appropriate asset allocation and rebalance as necessary

I would add that tax efficiency is important, and that people should optimize taxes for their personal situation.

Best wishes.
Andy
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midareff
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Re: Boglehead Rules Of Thumb To Investing?

Post by midareff »

Wagnerjb[code] wrote:
Here are my comments, as I don't agree with all the items on your list.

2. Some people prefer simplicity....or have a simple scenario of assets. That doesn't make a simple three fund portfolio superior for all. The three fund portfolio is probably inferior for most people.
3. Invest in low-cost passive funds

4. Set an appropriate asset allocation and rebalance as necessary

I would add that tax efficiency is important, and that people should optimize taxes for their personal situation.

Best wishes.

I've changed font color on my 2 cents. ... with all due respects to it's advocates there is a small and value premium to be captured and diversification benefits to REITs that should not necessarily be ignored. On the bond side the Total Bond Market can be a good place to start but it is not fully diversified being underweight in corporates and lacking TIPS, High Yield and International and Emerging Market Bonds.

On the other hand this stuff is really difficult for some people to manage and understand and three funders could be optimum for them. For others, not so much.
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ruralavalon
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Re: Boglehead Rules Of Thumb To Investing?

Post by ruralavalon »

Nerdicus wrote:I am just wondering what you personally would consider to be the overall Bugleweed rules of thumb to investing? I know this is a broad question since there are so many aspects to investing (age, income bracket, etc). But I’d like to narrow it down to the basics. Judging from all of the posts I’ve read, the 7 reasons below seem to be mentioned quite often. Let me know if I missed anything.

1.) You shouldn’t time the market
2.) The three-fund portfolio
3.) Invest in index funds
4.) Buy and hold & stay the course
5.) Invest just enough in your 401(k) to get the company match
6.) Have an emergency fund with 6 months worth of savings
7.) Live within you means and pay down/off your debt

Note: I wasn’t sure if I should mention dollar cost averaging vs. lump sum investing and rebalancing though, but if you’d like to give your take on these then go for it.
Live below your means

Keep expenses low.

Keep taxes low.

Diversify.

Invest at least enough in your work-based plan to get the full match each year.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
ML 59
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Re: Boglehead Rules Of Thumb To Investing?

Post by ML 59 »

Invest in instruments that pay interest or a dividend.

Investment in instruments that have an defined reason to be in your portfolio.

Collect and document your thoughts and investment plan in a written IPS.
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midareff
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Re: Boglehead Rules Of Thumb To Investing?

Post by midareff »

and from an old book by Peter Lynch.. know what you own and why you own it.
fposte
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Re: Boglehead Rules Of Thumb To Investing?

Post by fposte »

ML 59 wrote:Invest in instruments that pay interest or a dividend.

Investment in instruments that have an defined reason to be in your portfolio.

Collect and document your thoughts and investment plan in a written IPS.
I definitely see the last two around here, but the first seems contrary to most Boglehead views--I believe it was even suggested as a contrarian position to the poster who was looking for such.
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retiredjg
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Re: Boglehead Rules Of Thumb To Investing?

Post by retiredjg »

Nerdicus wrote:5.) Invest just enough in your 401(k) to get the company match
You have misinterpreted this one. There are times when this is a good idea. For example, if the 401k has poor choices and you can't fill both the 401k and an IRA, you sould invest up to the match in the 401k and put the rest in an IRA (traditional or Roth).

If your 401k has poor choices and you can fill both, do it in spite of the poor choices, most of the time.
ML 59
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Re: Boglehead Rules Of Thumb To Investing?

Post by ML 59 »

Perhaps I wasn't clear in an effort to be concise:

Bonds pay interest, equities pay dividends (and perhaps gains); commodities, collectibles, and precious metals pay neither. I stick to instruments that offer a defined rather than a speculative return.

...hope that helps...

Oh - and when I write Bonds, I am including bond funds; same for equities.
placeholder
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Re: Boglehead Rules Of Thumb To Investing?

Post by placeholder »

Dandy wrote:Bugleweed ? late night typo/thinko?
Auto correct I should imagine.
LateStarter1975
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Re: Boglehead Rules Of Thumb To Investing?

Post by LateStarter1975 »

retiredjg wrote:
Nerdicus wrote:5.) Invest just enough in your 401(k) to get the company match
You have misinterpreted this one. There are times when this is a good idea. For example, if the 401k has poor choices and you can't fill both the 401k and an IRA, you sould invest up to the match in the 401k and put the rest in an IRA (traditional or Roth).

If your 401k has poor choices and you can fill both, do it in spite of the poor choices, most of the time.
This
In addition, do not live within your means...live well BELOW your means and invest the rest
Debt is dangerous...simple is beautiful
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RyeWhiskey
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Re: Boglehead Rules Of Thumb To Investing?

Post by RyeWhiskey »

1) Live well below your means.
2) Invest regularly and responsibly.
3) Keep things simple, low cost, and long term.

:sharebeer
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AnimalCrackers
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Re: Boglehead Rules Of Thumb To Investing?

Post by AnimalCrackers »

I've found this article pretty close to what I think are the rules of thumb: http://whitecoatinvestor.com/the-default-portfolio/
"Everybody has a plan until they get punched in the face." -- philosopher Mike Tyson
SimplyRetire
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Re: Boglehead Rules Of Thumb To Investing?

Post by SimplyRetire »

I like the Boglehead's Philosophy list under "getting started":

Develop a workable plan
Invest early and often
Never bear too much or too little risk
Never try to time the market
Use index funds when possible
Keep costs low
Diversify
Minimize taxes
Keep it simple
Stay the course

I would also say: Save and Invest, Live off of the Rest.
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joe8d
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Re: Boglehead Rules Of Thumb To Investing?

Post by joe8d »

harikaried wrote:1 Develop a workable plan
2 Invest early and often
3 Never bear too much or too little risk
4 Diversify
5 Never try to time the market
6 Use index funds when possible
7 Keep costs low
8 Minimize taxes
9 Invest with simplicity
10 Stay the course

Stolen from http://www.bogleheads.org/wiki/Boglehea ... philosophy
I don't think you can beat that advice.
All the Best, | Joe
BogleBoogie
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Re: Boglehead Rules Of Thumb To Investing?

Post by BogleBoogie »

Add:

Buy low, sell high. It's not timing, it's the way to make money.
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Peter Foley
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Re: Boglehead Rules Of Thumb To Investing?

Post by Peter Foley »

I too reacted negatively to the "3 fund portfolio" as being a rule of thumb. I would prefer something along the lines of aiming for simplicity and ease of management. With many people having limited good options in their 401k/403b/457 accounts, a 3 fund portfolio just isn't an option.

A simple portfolio could be anything from a 1 fund "Target Retirement" to a 10 fund portfolio that seeks to broadly diversify internationally, tilt (perhaps), and include inflation sensitive assets like I-bonds. Simplicity and the ability to manage easily are better descriptors.

The 10 listed for the BH philosophy are the ones I use personally. #5 is a constant struggle.
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Zabar
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Re: Boglehead Rules Of Thumb To Investing?

Post by Zabar »

Get started early. In the beginning, a good saver will beat out an excellent investor.

Understand that many so-called investment advisors are little more than salespeople whose interests are not aligned with yours.

The purpose of investing is to maximize your control over your life so that you can live as you wish.

Frugality is not penury; you should enjoy the fruits of your labors.

The market is guaranteed to go both up and down. Get used to it!
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CABob
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Re: Boglehead Rules Of Thumb To Investing?

Post by CABob »

I can't help but add:
Question any rule of thumb.
Not that I don't agree with many or most of the items suggested, but, I think they all need to be analyzed and evaluated in light of ones personal situation.
Bob
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Boglenaut
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Re: Boglehead Rules Of Thumb To Investing?

Post by Boglenaut »

Nerdicus wrote: 2.) The three-fund portfolio
While Bogleheads generally seem to respect those who choose this path, I think they by would by no means considers it a Boglehead rule of thumb. It's part of keeping things simple, but 4 or 6 fund portfolios can also do this as well.
longinvest
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Re: Boglehead Rules Of Thumb To Investing?

Post by longinvest »

BogleBoogie wrote:Add:

Buy low, sell high. It's not timing, it's the way to make money.
Actually, this is a fallacy. It assumes that the market is a zero sum game with winners and losers.

Many Bogleheads invest through buying index funds of stocks and bonds.

Stocks give a return on your investment in the form of dividends and earning growth. You don't need to sell to get the dividends.

Bonds give a return on your investment in the form of interest payments. A bond will give you back your initial capital at maturity. You don't need to sell to get interests.

It's only when you start speculating with things like gold that you need to trade to make money (the greater fool theory).
Variable Percentage Withdrawal (bogleheads.org/wiki/VPW) | One-Fund Portfolio (bogleheads.org/forum/viewtopic.php?t=287967)
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