Bogleheads

[pkcrafter]

Jack Bogle's Pillar 6.

The Vanguard Diehards forum has a well-earned reputation as one of the best investment resources on the internet because of its long history of attracting and helping newer, inexperienced investors. The seeds of success have grown from the fundamental teachings of our mentor, Jack Bogle. I feel our mission has been, and continues to be, to pass along the wisdom of Mr. Bogle.

In recent years, the forum has also attracted more knowledgeable investors who enjoy discussing sophisticated ways to reduce risk and/or increase investing returns. This is interesting and educational for knowledgeable and experienced investors. However, our advanced discussions are sometimes confusing and possibly even overwhelming for newbies and less-experienced investors. As a result of these more sophisticated conversations (about which experts often disagree), it is not unusual to see new investors with a few thousand dollars trying to start with complicated slice-and-dice portfolios.

I discussed this problem with Mel and Taylor with the idea that the best way to help new and less sophisticated investors would be to post a series of conversations that will bring us back to Jack Bogle's common sense, easy-to-understand ways to invest successfully. Mel and Taylor agreed and suggested I review each of Jack's "12 Pillars of Wisdom."

The 12 Pillars were originally published in 1994 as an Epilogue in Mr. Bogle's first book, Bogle on Mutual Funds. I will post a series of conversations featuring each of Mr. Bogle's "Twelve Pillars of Wisdom" for the benefit of our new and less-experienced investors. Replies are encouraged, but please keep on topic.

Pillar 6. The Eternal Triangle.

Never forget that risk, return, and cost are the three sides of the eternal triangle of investing. Remember also that the cost penalty may sharply erode the risk premium to which an investor is entitled. You should understand unequivocally that investing in a fund with a relatively high expense ratio-more than 0.50% per year for a money market fund, 0.75% for a bond fund, 1.00% for a regular equity fund-bears careful examination. Unless you are confident that the higher costs you incur are justified by higher expected returns, select your investments from among the lower-cost no-load funds.
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Reference: Pillar 5

http://www.diehards.org/forum/....ght=pillar




Paul
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[mwgr5]

This is a critical point. Costs can have dramatic impact over the long run. I think most bogleheads view this point as common sense or a "no brainer." However, as Bogle was saying, many new investors do not understand the impact of costs. There are probably more investors with high expense front load funds then there are bogleheads. The importance of limiting expesnses cannot be stressed enough.
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Matt
www.sharpeinvesting.com

[EmergDoc]

I missed pillars 4 and 5 while out of town, anyone have a link?
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1) Invest you must 2) Time is your friend 3) Impulse is your enemy
4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

[mwgr5]

Pillar 5 - http://www.diehards.org/forum/....ght=pillar

Pillar 4 - http://www.diehards.org/forum/viewtopic.php?t=4686
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Matt
www.sharpeinvesting.com

[unclemick]