These are quotes from our latest Bogleheads' Guide to Investing--Second Edition:
MORE INVESTMENT GEMSFrom the "FORWARD" written by Jack Bogle: "Two especially notable characteristics mark the Boglehead culture: One is rationality. These individual investors are awash in common sense, intolerant of illogic, and permeated with the preference for facts over hyperbole. The second characteristic is caring. They are eager to help all investors. Experienced and novice alike."
Our book's DEDICATION: "To John Bogle -- A man whom we knew from afar for many years but have since come to know and cherish as a friend. While some mutual fund founders chose to make billions, he chose to make a difference."
"The ideas in this book are nearly all the result of extensive academic research. Many of our best suggestions are taken from the experience, writings, and speeches of our friend and mentor, Jack Bogle."
"Choose a sound financial lifestyle, start early and invest regularly, preserve your buying power, know what you're buying, keep costs and taxes low, diversify."
"Boglehead reunions and meetings are a microcosm of the USA -- a very diverse but very nice group of people who come to learn, share what they know, and help others."
"Knowing nothing about investing might be a benefit. You won't have to unlearn many popular beliefs propagated by Wall Street and the media that aren't true."
"Take the time to learn the basics of sound investing. It's really pretty simple stuff."
"Our hope is that when you calculate your net worth, you have no high-interest debts or revolving credit card balances. However, if you do, you should probably pay them off before you start investing."
"As you will soon learn, the Boglehead approach to investing is easy to understand and easy to do."
"There is no substitute for frugality. Deciding how much to save is the most important decision you will ever make because you can't invest what you don't save."
All good wealth builders have just one thing in common: They spend less than they earn."
"To determine how many years it will take an investment to double, simply divide 72 by the annual rate of return. For example, an investment that returns 8% doubles every 9 years."
"The mutual fund Prospectus is the single best way to find out about the objectives, costs, past performance figures and other important information about any mutual fund you're considering investing in."
"There's typically no benefit in investing in an annuity inside an already tax-deferred retirement plan. That's like wearing two raincoats when one will suffice!"
"Keep it simple. Make index funds the core or all, of your portfolio."
"If you don't know how to do something, ask. You get what you pay for. If there's a crisis, take action, history repeats itself. -- Well, guess what? Applying these principles to investing is destined to leave you poorer."
"Index investing is an investment strategy that Walter Mitty would love. It takes very little investment knowledge, no skill, practically no time or effort--and outperforms about 80 percent of all investors."
"The most important key to successful investing can be summed up in just two words--asset allocation."
"The Vanguard Group, using a 40-year database of 420 balanced mutual funds found that 77 percent of the variability of a fund's return was determined by the strategic asset allocation policy. Market timing and stock selection played relatively minor roles."
"An asset allocation plan is based on your personal circumstances, goals, time-horizon, and need and willingness to take risk."
"The academic community has given us sophisticated theories that we can use to select our investments and combine them in the most efficient manner to give us maximum return with minimum volatility."
"In the bear market of 2008, while equity fund losses of 30% to 60% were common, Vanguard's Total Bond Market Index Fund gained 5.05%"
"Don't invest in a bond fund with a duration that's longer than your time horizon."
"If you're going to worry about temporary losses in value, select bond funds with a shorter duration."
"It's hard to go wrong with any good quality, low-cost short- or intermediate-term bond fund."
"Understand the importance of protecting the future buying power of your assets by investing in such things as inflation-adjusted securities."
"It's important for you to understand that stock and bonds go up--and they go down. You need to be comfortable with that fact."
"We know that by simply changing our allocation between stocks and bonds, we can lesson the amount of volatility in our portfolio until we reach our comfortable sleep level."
"Exchange-traded funds (ETFs) are basically mutual funds that trade like stocks on an exchange."
"ETFs may be appropriate for investors who can make large, one-time purchases with the intention of holding them for a long period of time. -- On the other hand, investors are likely to shoot themselves in the foot if they plan to use ETFs as day trading or market timing vehicles."
"I Bonds and TIPS can help an investor protect the future spending power of their current dollars."
"We believe that investors will benefit from an international stock allocation of 20 percent to 40 percent of their equity allocation."
"Cost matters. We can't control market returns, but we can control the cost of our investments. -- Each year the average mutual fund takes nearly one-third of our investment return for itself."
"A Financial Research Corporation study determined that the expense ratio is the only reliable predictor of future mutual fund performance."
A Charles Schwab study found that a high-bracket taxpayer who invested $1.00 in U.S. stocks at the beginning if 1963 would have $21.89 at the end of 1992 if invested in a tax-deferred account. Meanwhile, the same $1.00 would have grown to only $9.87 if invested in a taxable account--less than half as much."
"Place your most tax-inefficient funds into your tax-deferred accounts; put what's left into your taxable account."
"According to an Investment Company Institute study, about 75% of all mutual fund investors mistakenly use short-term past performance as their primary reason for buying a specific fund."
"Since the 1960s, the average return of the top 20 mutual funds in each decade was less than the market index return in the next decade. Past performance is no guarantee of future performance."
"The idea that a bell rings to signal when investors should get into or out of the market is simply not credible. After nearly 50 years in this business, I do not know of anybody who has done it successfully and consistently. I don't even know anybody who knows anybody who has done it successfully and consistently." (Jack Bogle quote)
"As with all other aspects of investing, the earlier you start saving for your children's college education, the better chance you have of reaching your goals."
"I helped put two children through Harvard--my broker's children."
"They had a saying at the brokerage house: 'When someone buys or sells an investment, the broker makes money, the brokerage house makes money, and two out of three ain't bad.'"
"In his outstanding book, The Four Pillars of Investing, William Bernstein writes: "The stockbroker services his clients in the same way Bonnie and Clyde serviced banks."
"There is no foolproof one-size-fits-all system for rebalancing your portfolio."
"With a very simple, no-brainer investment strategy called passive investing you have, at the very least, a 70 percent chance of outperforming any given financial pro over an extended period of time.
"Make a plan, pick a rebalancing trigger, and stick with it."
"Due to their simplicity, low cost, and ease of manageability, investing in index funds is an excellent choice for nearly every investor."
"The investment media churn out massive amounts of what has become known as investment pornography.
"Tune out the 'noise.' It's almost always wrong."
"Rick Ferri (a former stock broker) aptly put it: "Wall Street wants you to believe they are there to make money for you, but their true purpose is to make money from you.""
"To quote University of Chicago professor Eugene Fama, one of the giants of modern portfolio theory: "I'd compare stock pickers to astrologers, but I don't want to badmouth astrologers.""
"Here are three guidelines for tuning up your 'noise' detector: 1. All forecasting is noise. 2. Listen to the helpers; ignore the hustlers. 3. Be a bona fide skeptic and do your homework."
"Investment newsletters: There are a few good ones around, but most have the lifespan of a fruit fly and a track record of providing terrible advice. Malcolm Forbes said it best: The only way to make money with a newsletter is by selling one."
"There's always a conflict of interest when purchasing investment products and investment advice from the same source."
"Charles J Givens wrote several huge money bestsellers, including Wealth Without Risk. Shortly before dying, Givens declared bankruptcy."
"The best antidote to noise is knowledge based on empirical research done by competent, unbiased parties."
"The thing that matters most in asset-allocation is our stock/bond/cash mix, and we want to get that right, because it is the primary determinant of our portfolio's risk and return."
"You will read about investors who claim great returns from exotic securities such as limited partnerships, hedge funds, timber, gold bullion, penny stocks, unit trusts, options, commodity futures, and so on. Our advice is to forget about them."
"When it comes to investing, there's a world of difference between good, sound information and information that sounds good. Your financial future depends on knowing the difference."
"Mastering your investments means mastering your emotions."
"The two very primitive emotions of greed and fear drive many investors and the stock market in general."
"Playing your hunches, blindly following the crowd or investment guru, trying too hard, acting on a hot tip, relying on supreme self-confidence, going for it to make a quick killing, playing it ultra-safe, and a multitude of other emotional based investment decisions--will almost always leave you poorer."
"If you think you can pick stocks, time the market, or know more about what's going to happen in the economy than other people do, you're a good candidate to fall into the overconfidence trap."
"The only certainty in investing is that past performance will not repeat."
"It's estimated that the total of all costs in the U.S. equity market is about $300 billion annually. We are talking about advisory fees, brokerage commissions, customer fees, legal fees, marketing expenditures, sales loads, securities processing expenses, and transaction costs. Not included in the $300 billion figure is the cost of taxes."
"It is critical that we keep our investment costs as low as possible."
"According to Vanguard and Lipper, Inc., in 2012 the average expense ratio for Vanguard funds was 0.19%, which is one-sixth the average fund's expense ratio of 1.11%."
The Financial Research Corporation conducts research for industry insiders. Their study's conclusion: "The expense ratio is the only reliable predictor of future mutual fund performance.""
"Mensa is an exclusive society whose membership is restricted to persons scoring in the top 2 percent on IQ tests. During a 15-year period when the S&P 500 had average annual returns of 15.3 percent, the Mensa Investment Club's returns averaged only 2.5 percent."
"The stock market is a very expensive place to learn that neither you nor anyone else is endowed with the gift of investment prophecy."
"Economist John Kenneth Galbraith once said: "There are only two kinds of interest-rate forecasters: Those who don't know, and those who don't know that they don't know."
"Many of us have a tendency to confuse the familiar with the safe and overrate the value of what we already own."
Herd investors have certain traits: They don't have a sound investment plan, they listen to the noise, buy and sell at the wrong times, and have no idea how badly they underperform the market."
"There are many roads to Dublin." (This is one: The Three Fund Portfolio)
"How much of my portfolio can I spend each year without running out of money? That's the big question that all retirees and near retirees want answered in no uncertain terms."
"Most of the credible studies of 30-year portfolio survival rates conclude that you can withdraw 4 percent of the portfolio value per year with a good chance of not exhausting the portfolio."
"One of the best ways to prevent bad stuff from wrecking financial havoc on you or your family is by carrying the proper types and amounts of insurance."
"Only insure against the big catastrophes and disasters that you can't afford to pay for out of pocket. The cheapest insurance is self-insurance."
"Long-term-care insurance isn't for everyone. Two groups of people will never need it--those with a very high net worth and those with little or no net worth."
"Since we don't know the date of our demise, we need to plan now for any number of eventualities, including the distribution of our assets after our death."
"Some mutual fund companies, including Vanguard, allow you to designate a beneficiary for your taxable accounts, which means those accounts would also avoid probate.
"Charitable trusts are a win-win situation for all concerned. You get the tax write-off and receive annuity payments for the balance of your days and your favorite charity or cause gets the donation."
"Procrastination is the biggest detriment to financial success."
"Don't let money concerns deprive you of enjoying the freedom to spend your time pursuing the activities--and enjoying the people--you treasure most."
"We hope this book will encourage you to join the legions of Boglehead investors online at http://www.bogleheads.org where there are lots of very bright and helpful Bogleheads who are ready, willing, and able to give you a helping hand."