I recently purchased the latest (6th) edition of Mutual Funds for Dummies by Eric Tyson, author and adviser (http://www.erictyson.com). This classic book is full of nuts & bolts information about all kinds of mutual funds plus sound advice for investors. Mr. Tyson is a fan of Vanguard and Boglehead style investing as reflected in excerpts like these:
Thank you Eric Tyson."Many investment books confuse folks. They present you with some newfangled system that you never figure out how to use without the help of mathematicians and a Nobel laureate as your personal tutors. -- The truth is, investing isn't all that difficult to buy or sell a mutual fund. Your decision needs to fit your overall financial objectives and individual situation."
"If you understand some basic concepts and find out how to avoid major mistakes, you can be even more successful than most so-called investment professionals."
"Thanks to our spending-oriented culture, the average American knows car models better than types of mutual funds."
"Cash-value life insurance isn't a good investment vehicle.--Term life insurance is best for the vast majority of people."
"Unlike most other types of retirement accounts, an annuity give you no upfront tax deductions for your contributions."
"Avoid limited partnerships (LPs) sold directly through brokers and financial planners."
"Using history to predict the future, especially the near future, is dangerous."
"Because good mutual funds take most of the hassle of out figuring which investments to invest in, they're among the best investment vehicles ever created."
"A mutual fund management team does more research and due diligence (picking stocks and bonds) than you could ever have the energy or expertise to do in what little free time you have."
"Fidelity and Vanguard, the two largest distributors of no-load funds today, exacted sales charges as high as 8.5% during the early 1970s."
"The single biggest mistake that mutual fund investors make is investing in funds before they're prepared."
"Before you save money toward goals, accumulate an amount of money equal to about three to six months of household living expenses for emergency purposes."
"Each decade you delay (investing) approximately doubles the percentage of your earnings that you should save to meet your goals."
"Taking advantage of saving and investing in tax-deductible retirement accounts should be your number-one financial priority (unless you're still paying off high-interest consumer debt."
"Absolutely don't miss out on contributing to your employer's 401(k) plan if your employer matches a portion of ;your contributions."
"Few subject areas have more misinformation and bad advice than what is dished out on investing for your children's college expenses."
"Don't invest in your child's name unless you want to pay for your child's full college costs yourself."
"As for Peter Lynch, who states in his book than an amateur stock picker can easily beat 95% of the pros, shame on him!
"The notion that most average people and non-investment professionals can invest in individual stocks with minimal effort and beat the best full-time, experienced money managers is, how should I say, ludicrous and absurd."
"No one I know of has ever said on her deathbed: "I wish I had spent more time watching my investments."
"Investment clubs may have social or hobby value but they can hurt your checkbook more then they help."
"For the vast majority of investors, you don't need to complicate your lives by investing in ETFs."
"Hedge funds have produced lower average annual returns when compared with similar mutual funds."
"Hedge fund investors don't receive all the federal and state law protections that commonly apply to most registered investments."
"You should never pay for a 'financial plan' from an investment salesperson."
"Top no-load companies, such as Vanguard, for example, don't sell any load funds through brokers."
"High-fee wrap accounts aren't in your best interest."
"Steel yourself against clever marketing brochures and charming salespeople."
"Choosing funds on simplistic comparisons of performance numbers is dangerous."
"Realize that funds with relatively high returns may achieve their results by taking on a lot of risk. Those same funds often take the hardest fall during major market declines."
"Of the number one top-performing stock and bond funds in each of the last 20 years, a whopping 80% of them subsequently performed worse than the average fund in their peer group over the next five to ten years!"
"A good annual report is educational and honest. As you can see, Vanguard's is both."
"To earn better returns, you have to take risks."
"The average fund family's expense ratio is a whopping four times higher than Vanguard's."
"History has proven Bogle not only to be right but also to be a mutual fund investor's best advocate."
"One of the biggest problems novice investors have at Fidelity is discerning the good funds from the not-so-good ones."
"Hundred's of mutual fund companies offer thousands of funds. Many aren't worth your consideration."
"The branch representative at your local bank is probably a broker who's earning commissions from the mutual funds he's selling you."
"The field of investment and financial planning is booby-trapped with land mines awaiting the naive investor."
"Planners may try to make it all so complicated that you believe you can't possible manage your finances or make major financial decisions without them."
"You can invest in stock funds that are tax friendly. In other words, funds whose investing style keep highly taxed distributions to a minimum."
"Don't invest in taxable fund just before it makes a large distribution."
"Although market timing sounds good in theory, a wealth of studies and evidence shows that market timing simply doesn't work in practice."
"Don't jump in and out of funds. After you've bought into a decent fund, you have few good reasons to move out of it. Not only does buy-and-hold investing offer better returns, but also it's less work and hassle."
"Over long periods index funds outperform about three-quarters of their actively-managed peers investing in the same types of securities!"
"Centralizing your investments in one family saves on administrative hassles by cutting down on the number of applications to complete, envelopes to open, statements to file, tax statements to deal with and so on. Plus, you're more likely to find your way around better at a company that you spend more of your time interacting with."
"Take Thoreau's advice to simplify your investing life: Buy stock funds that are 100% (or close to 100%) in stocks, bond funds that invest only in bonds, and international stock funds that are entirely invested overseas. That way your asset allocation calculations stay simple."
"When you're considering selling a non-retirement account investment, especially one that has appreciated considerably since its original purchase, be mindful of taxes. Assets held for more than 12 months are eligible for the more favorable capital gains tax rates. -- One more benefit of the buy-and-hold investing strategy."
"Except for psychological security, selecting a fund company with an office in your area doesn't offer much benefit."
"With those higher yields comes greater risk. After all, there's no free lunch in the investing world."
"International bonds are riskier because their interest payments can be offset by currency price changes and may be riskier due to political instability and insufficient information."
"Economic predictions are difficult. In fact, over long periods of time meaningful predictions are almost impossible."
"Don't try to time and predict the bond market."
"Because stocks and bonds don't move in tandem, bonds can be a great way to hedge against declines in the stock market."
"A major mistake that novice bond fund investors make is to look at recent performance and assume that those are the returns they're going to get in the future."
"Dividends are just one part of a fund's return, which also includes capital-gain distributions and changes in the bond fund's share price."
"The SEC yield is the best to use when you compare bond funds."
"You'll earn more over the years and have better access to your money in bond funds than CDs."
"The stock market isn't the place to invest money that you need to tap in the near future."
"Over the last two centuries, investors holding diversified stock portfolio earned a rate of return averaging about 9 to 10% per year, which ended up being about 6 to 7% higher than the rate of inflation."
"If you want a fund that gradually scales back its risk as you get closer to retirement, take a look at Vanguard's Target Retirement fund series."
"In most cases, you should avoid specialty or sector funds."
"Don't purchase precious metals futures contracts. Futures aren't investment; they're short term gambles."
"The dreaded D's: Downsizing, Divorce, Disability and Death."
"Buying investments on margin isn't something I recommend."
"You need to realize that what happens to the value of your stock and bonds funds in the short term is largely a matter of luck."
"If you're hoping to strike it rich by buying into funds just before their dividends are paid, don't bother. All you may accomplish is increasing your income tax bill."
"I recommend that you don't track the share prices of your funds every day. It's time consuming and nerve-racking and can make you lose sight of the long term."
"Don't dwell on daily news reports of the latest stock (and bond) market gyrations."
"Unless you experience a major change in your circumstances, I advocate adjusting your portfolio mix every three to five years."
"I sometimes wonder if the people who write tax forms come from another planet."
"All retirement accounts allow you to begin withdrawing money, without penalty, after age 59 1/2."
"If you can, you're generally better off using the money outside of retirement accounts before you start to tap the retirement account money."
"If you want a tax, financial, or legal adviser--or a savvy relative--to help you keep an eye on your investments, you can ask that she be listed on your accounts as an interested party to receive duplicate statements."
"Newsletter writers don't know anything that isn't already reflected in the prices of securities. If newsletter writers did have a knack for unearthing information that no one else typically knew, they'd be be too busy investing their own money and making millions off their predictions to waste their time publishing a newsletter."
"If you want a snapshot summary of a lot of data, as well as some thoughtful analysis about a fund you're consider investing in or currently own, Morningstar can't be beat."
"When you invest your money, especially in mutual funds, having a computer at your disposal to make wise investing decisions and to manage your portfolio is not necessary nor is it advantageous.-- Some investors fool themselves into believing that their research will help them beat the markets."
"Message boards and chat rooms are dangerous places to tread for the naive and too trustful.-- Never trust any advice you get from a chat room or message board without verifying it through a reliable independent source."
Among the fund company websites that I have examined, Vanguard's (http://www.vanguard.com) is unsurpassed.
"Over the long term, a fund's fees are one of the biggest (and most predictable) determinants of the fund's likely future returns."
"Some people buy mutual funds the way they build a clothing collection.-- Before you know it, you may own numerous funds that don't really go together well."
"Read about, listen to, and absorb what's going on in the world. But don't use this noise of the day to help you make your investing decisions."
"Stop looking at fund performance top-ten lists. Most of these lists completely ignore risk."
"Investing in mutual finds isn't difficult: common sense and an ounce of financial sense are all you need."
'If anything, constant tinkering with a portfolio tends to lower returns. -- Over long time periods, beating the markets is virtually impossible."
"The term Registered Investment Adviser denotes that the adviser is registered with the SEC; it means nothing as a professional credential."
"Don't become so obsessed with making, saving, and investing money that you neglect what money can't buy: Your health, friends, family, and exploration of career options and hobbies."
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