What are some common misconceptions found in this forum?
What are some common misconceptions found in this forum?
Even if most BHs are intelligent, not everything in this forum is correct. If you see common misconceptions appeared often, please share them for future readers.
edited: If possible, include why it's a misconception. Seems some of these are out of context.
edited: If possible, include why it's a misconception. Seems some of these are out of context.
Last edited by acegolfer on Wed Mar 11, 2015 1:27 pm, edited 1 time in total.
Re: What are some common misconceptions found in this forum?
Total International Stock Index fund is more tax-efficient than Total US Stock Index fund.
Bonds must go in tax-advantaged accounts.
Equities must go in taxable accounts.
Total US Bond Index fund has a better return over the past 3 years than the Short-term corporate bond index fund.
Rebalancing doesn't help your performance.
Tax-loss harvesting is too complicated.
Low income taxpayers should invest in 529 plans.
An emergency fund needs to be kept in cash like CDs or a savings accounts because one needs instant access to 6 months of expenses on a Wednesday morning.
Livesoft knows what he's talking about.
Bonds must go in tax-advantaged accounts.
Equities must go in taxable accounts.
Total US Bond Index fund has a better return over the past 3 years than the Short-term corporate bond index fund.
Rebalancing doesn't help your performance.
Tax-loss harvesting is too complicated.
Low income taxpayers should invest in 529 plans.
An emergency fund needs to be kept in cash like CDs or a savings accounts because one needs instant access to 6 months of expenses on a Wednesday morning.
Livesoft knows what he's talking about.
Re: What are some common misconceptions found in this forum?
Take your pick.
https://rpseawright.wordpress.com/2012/ ... al-biases/
We can't escape our human frailties. With some help, we can try to manage them.
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https://rpseawright.wordpress.com/2012/ ... al-biases/
We can't escape our human frailties. With some help, we can try to manage them.
Lev
Re: What are some common misconceptions found in this forum?
I think it is a misconception that everyone on this forum is a "pure" Bogelhead in every way. I think the reality is that the people on this forum greatly respect and do many things the Bogelhead way, but most people do some things that aren't entirely Bogelhead. Even Jack Bogel owns some actively managed funds.
Steve
Re: What are some common misconceptions found in this forum?
A three fund portfolio is the only reasonable way to do it
International holdings of any kind are completely unnecessary
No one can beat the market and any manager that beats the index does so out of pure dumb luck because there's no ability involved whatsoever
No one should ever pay a financial professional to help them manage their finances
Everyone on this forum thinks the same way
International holdings of any kind are completely unnecessary
No one can beat the market and any manager that beats the index does so out of pure dumb luck because there's no ability involved whatsoever
No one should ever pay a financial professional to help them manage their finances
Everyone on this forum thinks the same way
Last edited by JonnyDVM on Sat Mar 14, 2015 7:22 pm, edited 1 time in total.
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Re: What are some common misconceptions found in this forum?
I have found some truth in each of the above statements, but need to be taken in context to understand where the boundaries are, and why they are at least partially true in some cases. I would not say these are coming through as absolute truths in the forum because there are enough wise ones here to qualify the statements and give some context as to why they might not be true for a particular individual's situation.
Re: What are some common misconceptions found in this forum?
+1SteveM wrote:I think it is a misconception that everyone on this forum is a "pure" Bogelhead in every way. I think the reality is that the people on this forum greatly respect and do many things the Bogelhead way, but most people do some things that aren't entirely Bogelhead. Even Jack Bogel owns some actively managed funds.
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Re: What are some common misconceptions found in this forum?
"The most important thing of all is to have the very lowest expense ratio possible."
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Re: What are some common misconceptions found in this forum?
I think those who respond to questions are well intentioned but we all have egos and feel compelled to interject our knowledge whether accurate or bogus ; but that should be a known problem when one posts , i.e. "who do you believe ?" - nowadays there are so many resources available to each of us and so doing a little homework on our own before posting is probably a smart thing to do
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Re: What are some common misconceptions found in this forum?
Common misconception: I know what I'm talking about...
Although some on the forum know better and have pointed me to the correct answers...
Although some on the forum know better and have pointed me to the correct answers...
The surest way to know the future is when it becomes the past.
Re: What are some common misconceptions found in this forum?
Exactly , why spend the money for a financial planner when you can get good, bad, and indifferent answers right here for freenisiprius wrote:"The most important thing of all is to have the very lowest expense ratio possible."
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Re: What are some common misconceptions found in this forum?
A 7 figure portfolio should be invested in a fundamentally different way from a 5 figure portfolio
A 7 figure portfolio would see a greater benefit from an adviser/CFP than a 5 figure portfolio
Anyone with a 5 figure portfolio is way behind
(actually, just about anyone making enough to have 5 figures in the bank is in the top 1% of earners in the entire world)
Distributions in retirement without pension income will be taxed at the marginal rate
Fund selection and slice/dice are more important than overall asset allocation
And the big one that is really starting to bug me:
The 1098-T is an accurate representation of tuition paid and scholarships/529 distributions received
...I'm sure I could come up with more.
A 7 figure portfolio would see a greater benefit from an adviser/CFP than a 5 figure portfolio
Anyone with a 5 figure portfolio is way behind
(actually, just about anyone making enough to have 5 figures in the bank is in the top 1% of earners in the entire world)
Distributions in retirement without pension income will be taxed at the marginal rate
Fund selection and slice/dice are more important than overall asset allocation
And the big one that is really starting to bug me:
The 1098-T is an accurate representation of tuition paid and scholarships/529 distributions received
...I'm sure I could come up with more.
Last edited by nanoanalyzer on Wed Mar 11, 2015 10:02 am, edited 1 time in total.
"If you think stocks are like physics, you believe there must be smart people who can measure exactly where the Dow Jones Industrial Average will be in five months." -Morgan Housel
Re: What are some common misconceptions found in this forum?
No one should ever be invested in 100% equities (excluding emergency funds), no matter his or her time horizon, portfolio size, or demonstrated immunity to market panics.
Again, there's a kernel of wisdom to the belief, but it's often presented as an inviolate principle, brooking no exceptions or heresies.
John <-- effectively 100% equities for the last 20 years, but not all of the next 20
Again, there's a kernel of wisdom to the belief, but it's often presented as an inviolate principle, brooking no exceptions or heresies.
John <-- effectively 100% equities for the last 20 years, but not all of the next 20
Re: What are some common misconceptions found in this forum?
Small value funds aren't tax efficient.
ETFs are fundamentally different that mutual funds and shouldn't be used in a Boglehead portfolio.
and as previously stated in this thread:
ETFs are fundamentally different that mutual funds and shouldn't be used in a Boglehead portfolio.
and as previously stated in this thread:
livesoft wrote: Bonds must go in tax-advantaged accounts.
Equities must go in taxable accounts.
Most of my posts assume no behavioral errors.
Re: What are some common misconceptions found in this forum?
I spent 30 minutes on the phone with the student business office of my son's university trying to decipher where the number on his 1098-T came from, so I can appreciate this misconception. Let's just say that in our case, the number was off by a factor of 2.nanoanalyzer wrote:And the big one that is really starting to bug me:
The 1098-T is an accurate representation of tuition paid and scholarships/529 distributions received
Re: What are some common misconceptions found in this forum?
One size fits all.
Re: What are some common misconceptions found in this forum?
I think that covers a large % of the most common ones which are purely misconceptions and actually about finance. Stuff like conflating anti-consumerist extreme frugality with an *investment* philosophy is just that, mixing apples and oranges, rather than a 'misconception' per se.JonnyDVM wrote:A three fund portfolio is the only reasonable way to do it
International holdings of any kind are completely unnecessary
Non one can beat the market and any manager that beats the index does so out of pure dumb luck because there's no ability involved whatsoever
No one should ever pay a financial professional to help them manage their finances
Everyone on this forum thinks the same way
Another though would be inability to distinguish between prediction of realized future return and estimate of current expected return. That's on display now in the thread 'Bernstein says expected return for next 20 yrs is 2%'. The related misconception, also to your point 3, is to apply 'nobody knows nuthin' to expected return. But it would be irrational to invest in anything if you had *no* idea of the expected return. The faux-folksy NKN quippers really believe instead I think, that the expected return on stocks is the comfortingly high historical realized return on US stocks in the period of American economic dominance in the 20th century, which is again a misconception of what expected return means.
Another variation on your third point is the idea that some markets *are* subject to easy analysis by amateurs though others are totally inscrutable. This comes up periodically with junk bonds for example. Amateurs can determine this market is systematically mispriced against investors, or they can read and trust their favorite semi-amateur guru's analysis to the same effect, while the stock and high grade bond markets are strictly subject to 'NKN'.
Re: What are some common misconceptions found in this forum?
Misconceptions:
Retirees should use asset allocation.
Arithmetic mean equals geometric mean.
Long threads are usually interesting.
Millionaires have taxable accounts.
1/1024 should not be written as 0.0009765625 because you can't know a number that accurately.
Retirees should use asset allocation.
Arithmetic mean equals geometric mean.
Long threads are usually interesting.
Millionaires have taxable accounts.
1/1024 should not be written as 0.0009765625 because you can't know a number that accurately.
Re: What are some common misconceptions found in this forum?
What if in the future they are no longer misconceptions?acegolfer wrote: If you see common misconceptions appeared often, please share them for future readers.
As with many things in this area of personal finance we discuss, what one thinks is a misconception another person thinks is the right way.
I will advise future readers to study up on different topics and decide what's right for them in the area of PERSONAL finance. We will only know if they were misconceptions 10 or 20 years from now.
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Re: What are some common misconceptions found in this forum?
Everyone has a my sense of humor.
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Re: What are some common misconceptions found in this forum?
I like this one... nicely done, 555!555 wrote:Long threads are usually interesting.
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Re: What are some common misconceptions found in this forum?
I liked the following so far ! :
"Livesoft knows what he's talking about".
"The 1098-T is an accurate representation of tuition paid and scholarships/529 distributions received"
Got educated on this a few weeks ago ! Today I know how to use the 1098-T.
"No one should ever be invested in 100% equities (excluding emergency funds), no matter his or her time horizon, portfolio size, or demonstrated immunity to market panics."
"Livesoft knows what he's talking about".
"The 1098-T is an accurate representation of tuition paid and scholarships/529 distributions received"
Got educated on this a few weeks ago ! Today I know how to use the 1098-T.
"No one should ever be invested in 100% equities (excluding emergency funds), no matter his or her time horizon, portfolio size, or demonstrated immunity to market panics."
Invest when you have the money, sell when you need the money, for real life expenses...
Re: What are some common misconceptions found in this forum?
Precious metals are taxed at 28%.
Re: What are some common misconceptions found in this forum?
I will throw one out there though..... That anyone in here actually understands bond funds.
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Re: What are some common misconceptions found in this forum?
Bogleheads never own individual stocks but I saw many of them holds APPL and BRK-B
Allocation : 80/20 (90% TSM, 10% on ARKK,XBI,XLK/individual stocks and 20% TBM) |
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Re: What are some common misconceptions found in this forum?
Roth accounts are better than tax deductible because of the power of compounding.
Car leases are always a bad deal.
Its better to pledge your house for a loan than to pledge your car.
Car leases are always a bad deal.
Its better to pledge your house for a loan than to pledge your car.
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Re: What are some common misconceptions found in this forum?
Bogleheads hold index funds only. They don't many use actively managed funds and individual equities.
Bogleheads avoid using other fund families at all costs. They don't - many use Schwab and Fidelity along with T Rowe Price and some other less orthodox mutual fund companies that use sales commissions to push their product.
Cash is dead. - Absolutely not, more than a few posters hold quite a bit of it. Nothing wrong with being able to sleep soundly at night, I highly recommend it.
You have to be rich to be a Boglehead. - Wrong, as in the general population, many Bogleheads are not millionaires. However, they are on their way to or already are financially independent.
You won't be able to retire if you have less than 25x expenses less Social Security and other income such as pensions. - Nonsense, millions of people have retired with less and continue to retire on a daily basis.
Bogleheads are cheap. Cheap indeed!, especially with threads talking about $5,000 watches, exotic vacations, European trips, fine dining, cars that cost more per pound than the average car in America. We are frugal, we make our spending choices wisely to create the most benefit for the "spender" as opposed to the "seller of such goods and services".
Bogleheads avoid using other fund families at all costs. They don't - many use Schwab and Fidelity along with T Rowe Price and some other less orthodox mutual fund companies that use sales commissions to push their product.
Cash is dead. - Absolutely not, more than a few posters hold quite a bit of it. Nothing wrong with being able to sleep soundly at night, I highly recommend it.
You have to be rich to be a Boglehead. - Wrong, as in the general population, many Bogleheads are not millionaires. However, they are on their way to or already are financially independent.
You won't be able to retire if you have less than 25x expenses less Social Security and other income such as pensions. - Nonsense, millions of people have retired with less and continue to retire on a daily basis.
Bogleheads are cheap. Cheap indeed!, especially with threads talking about $5,000 watches, exotic vacations, European trips, fine dining, cars that cost more per pound than the average car in America. We are frugal, we make our spending choices wisely to create the most benefit for the "spender" as opposed to the "seller of such goods and services".
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
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Re: What are some common misconceptions found in this forum?
Do you mind explaining this one a little further?Distributions in retirement without pension income will be taxed at the marginal rate
Thank you.
How many retired people does it take to screw in a lightbulb? Only one, but he takes all day.
Re: What are some common misconceptions found in this forum?
I will be in a higher tax bracket in retirement, even when I am 85 and have been spending down my portfolio for 20 years.
I will be in a higher tax bracket in retirement, even with a paid off house, no more mortgage payments, no more child rearing expenses, no more retirement savings, no more FICA taxes, etc.
Buying a million dollar shack(with granite countertops and a Jacuzzi tub) in the Bay Area makes any kind of sense.
I am smart enough to “tilt” my portfolio to get a higher return.
I will be in a higher tax bracket in retirement, even with a paid off house, no more mortgage payments, no more child rearing expenses, no more retirement savings, no more FICA taxes, etc.
Buying a million dollar shack(with granite countertops and a Jacuzzi tub) in the Bay Area makes any kind of sense.
I am smart enough to “tilt” my portfolio to get a higher return.
Re: What are some common misconceptions found in this forum?
Some withdrawals in retirement will not be taxed at the marginal rate. Some will be offset by deductions and exemptions. Some will get taxed at the 0% rate. Some will get taxed at the 10% rate. Some will eventually get taxed at the marginal rate. Some might get taxed at higher than the published marginal rate due to phase-outs and loss of credits.Barefootgirl wrote:Do you mind explaining this one a little further?Distributions in retirement without pension income will be taxed at the marginal rate
Thank you.
Re: What are some common misconceptions found in this forum?
And if you are in the income range where each additional dollar of income causes more of your Social Security to be taxed that can increase the effective marginal tax rate a lot.livesoft wrote:Some withdrawals in retirement will not be taxed at the marginal rate. Some will be offset by deductions and exemptions. Some will get taxed at the 0% rate. Some will get taxed at the 10% rate. Some will eventually get taxed at the marginal rate. Some might get taxed at higher than the published marginal rate due to phase-outs and loss of credits.Barefootgirl wrote:Do you mind explaining this one a little further?Distributions in retirement without pension income will be taxed at the marginal rate
Thank you.
Re: What are some common misconceptions found in this forum?
Vanguard is perfect.
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Re: What are some common misconceptions found in this forum?
Here's a few more:
One is capable of holding a 100/0, 90/10 or 85/15 portfolio because of (pick your choice): youth, have a lot of time before I need the money, I'm young I can handle the risk - bonds are for old fogies or are a complete waste because they yield less than inflation.
A better mousetrap has been designed - just use a portfolio back-testing "free" software package and you too can "beat the market", "generate positive alpha" "generate consistent high returns with low standard deviation". - They forgot the caveat that past performance is not indicative of future performance.
Investing in equities over the "long-term" almost always produces positive returns. - The only thing proven over the long-haul is that you don't live forever. Tomorrow's long-term could be short-lived and liquidated at the most inopportune of times if you choose to have a legacy purpose.
Average portfolio returns equals actual returns earned each year or every other year with consistency. - Average portfolio returns could consist of 4 years of negative returns followed by 2 years of flat returns and then 3 years of very high returns. If you fail to hold for the entire period in which the average returns have been calculated (beginning to end) you will fail to earn the same returns, you may earn more or you may earn much much less.
Paying off a mortgage before the maturity date is foolish because leverage always works. - That worked out fine for those who invested with Bernie Madoff instead of paying off the mortgage or who took out home equity lines and invested with Bernie Madoff, or who doubled down by borrowing on their primary home to then invest in rental properties. There is nothing wrong with paying off debt so long as you have the necessary liquidity to pay your expenses and taxes for the next 2-3 years in case of job loss, otherwise pay as you go.
One is capable of holding a 100/0, 90/10 or 85/15 portfolio because of (pick your choice): youth, have a lot of time before I need the money, I'm young I can handle the risk - bonds are for old fogies or are a complete waste because they yield less than inflation.
A better mousetrap has been designed - just use a portfolio back-testing "free" software package and you too can "beat the market", "generate positive alpha" "generate consistent high returns with low standard deviation". - They forgot the caveat that past performance is not indicative of future performance.
Investing in equities over the "long-term" almost always produces positive returns. - The only thing proven over the long-haul is that you don't live forever. Tomorrow's long-term could be short-lived and liquidated at the most inopportune of times if you choose to have a legacy purpose.
Average portfolio returns equals actual returns earned each year or every other year with consistency. - Average portfolio returns could consist of 4 years of negative returns followed by 2 years of flat returns and then 3 years of very high returns. If you fail to hold for the entire period in which the average returns have been calculated (beginning to end) you will fail to earn the same returns, you may earn more or you may earn much much less.
Paying off a mortgage before the maturity date is foolish because leverage always works. - That worked out fine for those who invested with Bernie Madoff instead of paying off the mortgage or who took out home equity lines and invested with Bernie Madoff, or who doubled down by borrowing on their primary home to then invest in rental properties. There is nothing wrong with paying off debt so long as you have the necessary liquidity to pay your expenses and taxes for the next 2-3 years in case of job loss, otherwise pay as you go.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
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Re: What are some common misconceptions found in this forum?
That bogleheads are topic experts on everything. I cannot believe some of the bad and outdated advice given around here that is treated as gospel by bogleheads.
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Re: What are some common misconceptions found in this forum?
Makes a pretty nice firestarter, doesn't it?Ruby wrote: Today I know how to use the 1098-T.
http://www.bogleheads.org/forum/viewtopic.php?t=14166Barefootgirl wrote:Do you mind explaining this one a little further?Distributions in retirement without pension income will be taxed at the marginal rate
Thank you.
"If you think stocks are like physics, you believe there must be smart people who can measure exactly where the Dow Jones Industrial Average will be in five months." -Morgan Housel
Re: What are some common misconceptions found in this forum?
Misconception:
Stocks are cheap, because they're down a few percent from all time highs.
Stocks are cheap, because they're down a few percent from all time highs.
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Re: What are some common misconceptions found in this forum?
One better, just because you've written a book, have three letters assigned to your name by passing a test or even apprenticing in a field of study, make you an expert it does not says Yoda. That applies to all fields of study, not just finance. Proficiency is developed by practice, practice, practice, and then when you think you have it all done, practice some more. Fields of study are always changing. It's scary how the internet has made some relatively new entrants into the field "experts" in "new wave retirement thinking" or "the research has shown we should hold high equity allocations in the latter half of retirement" and people eat and drink this stuff up thinking some new elixir to cure their retirement preparation ills has been found. The new snake-oil salesman have been transformed from the brokers of yesterday to the "retirement planning experts" of today.Busting Myths wrote:That bogleheads are topic experts on everything. I cannot believe some of the bad and outdated advice given around here that is treated as gospel by bogleheads.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Re: What are some common misconceptions found in this forum?
I agree in particular about context. Also, many misconceptions being recounted here are written in absolute terms such as "only" or "always" or "never," when their original authors probably included conditional, qualifying terms such as "usually," or "often," or "sometimes." Without noting such qualifiers, some reported misconceptions can be misleading, especially without context.C8H18Engineer wrote:I have found some truth in each of the above statements, but need to be taken in context to understand where the boundaries are, and why they are at least partially true in some cases. I would not say these are coming through as absolute truths in the forum because there are enough wise ones here to qualify the statements and give some context as to why they might not be true for a particular individual's situation.
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
Re: What are some common misconceptions found in this forum?
Misconception:
People who assume the sun will come up tomorrow need to be reminded that "past performance is not a guarantee of future results".
People who assume the sun will come up tomorrow need to be reminded that "past performance is not a guarantee of future results".
Re: What are some common misconceptions found in this forum?
Exactly... some are creating their own misconceptions in this one.Fallible wrote:I agree in particular about context. Also, many misconceptions being recounted here are written in absolute terms such as "only" or "always" or "never," when their original authors probably included conditional, qualifying terms such as "usually," or "often," or "sometimes." Without noting such qualifiers, some reported misconceptions can be misleading, especially without context.C8H18Engineer wrote:I have found some truth in each of the above statements, but need to be taken in context to understand where the boundaries are, and why they are at least partially true in some cases. I would not say these are coming through as absolute truths in the forum because there are enough wise ones here to qualify the statements and give some context as to why they might not be true for a particular individual's situation.
Re: What are some common misconceptions found in this forum?
This time is different.Twins Fan wrote:Exactly... some are creating their own misconceptions in this one.
Re: What are some common misconceptions found in this forum?
Social Security is a good deal
Not using a range for allocation (55-65/45-35 vs 60-40)
Not using a range for allocation (55-65/45-35 vs 60-40)
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Re: What are some common misconceptions found in this forum?
Wow - I'm surprised you are still here thenBusting Myths wrote:That bogleheads are topic experts on everything. I cannot believe some of the bad and outdated advice given around here that is treated as gospel by bogleheads.
What I found in the threads I read - is as soon as someone has "bad or outdated advice" several others sweep in to offer an alternative view. Most of the discussions seem to be balanced having several points of view (with references to additional reading oftentimes) allowing the reader to take away what they will.
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Re: What are some common misconceptions found in this forum?
livesoft wrote: Rebalancing doesn't help your performance.
Livesoft knows what he's talking about.
That rebalancing increases investment return - (I am not aware of any studies that show that rebalancing increases expected returns - I would welcome participants to cite studies that show any consistent rebalancing bonus).
Re: What are some common misconceptions found in this forum?
That finance is a hard science with exactness and certainty, both of which can be found on this forum.
That is it is not possible to confuse "common misconceptions" with "opinions that I don't agree with"
That is it is not possible to confuse "common misconceptions" with "opinions that I don't agree with"
Kolea (pron. ko-lay-uh). Golden plover.
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Re: What are some common misconceptions found in this forum?
This one is true.CAMEL wrote:Vanguard is perfect.
Re: What are some common misconceptions found in this forum?
I feel like there is excessive fear of rising interest rates.
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Re: What are some common misconceptions found in this forum?
I read occasionally but do post as often...you should see some of those marriage/personal life threads.DaftInvestor wrote:Wow - I'm surprised you are still here thenBusting Myths wrote:That bogleheads are topic experts on everything. I cannot believe some of the bad and outdated advice given around here that is treated as gospel by bogleheads.
What I found in the threads I read - is as soon as someone has "bad or outdated advice" several others sweep in to offer an alternative view. Most of the discussions seem to be balanced having several points of view (with references to additional reading oftentimes) allowing the reader to take away what they will.
Last edited by Busting Myths on Wed Mar 11, 2015 2:24 pm, edited 1 time in total.
Re: What are some common misconceptions found in this forum?
This seems odd; and I've barely seen this discussed. Social Security isn't optional, so I wonder what the point would be about out thinking if it's "good" or "Bad"basspond wrote:Social Security is a good deal
"Don't trust everything you read on the Internet"- Abraham Lincoln
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Re: What are some common misconceptions found in this forum?
Misconception:
Roth IRA should be maxed immediately after getting the 401k match.
Roth IRA should be maxed immediately after getting the 401k match.