"Investing Made Simple" -- A Gem

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"Investing Made Simple" -- A Gem

Postby Taylor Larimore » Tue Mar 27, 2012 4:29 pm

Hi Bogleheads:

Boglehead Mike Piper, editor of the The Oblivious Investor, has written a short, easily read, but important book, titled: "Investing Made Simple.". Below are valuable excerpts that will be added to our Investment Gems:

"Many people seem to think that investing is a complicated, highly technical topic. It's really not."

"The single most important thing you can do to increase your chance of having enough money to be able to retire someday is to save and invest regularly."

"Plain old procrastination and forgetfulness are two of the biggest hurdles for many investors. Automate your investments, and you'll win the battle easily."

"There's an entire industry built on convincing us that investing is complicated."

"You've been bombarded with a bunch of conflicting information from parties who are each more concerned with getting you to consume their products and services than they are with providing you with unbiased advice."

"The benefit to tax-deferred investing is that your money can grow more quickly than it could if it were taxed on its growth along the way."

"Generally speaking, the priority for retirement investing is as follows: 1) Invest enough in your 401(k) to get the maximum match from your employer. 2) Max out your IRA contribution. 3) Go back to your 401(k) and finish maxing that out. 4) Invest via taxable accounts."

"Generally speaking, it's preferable to roll your 401(k) into an IRA rather than into your new employer's 401(k)."

"Multiple studies have shown that, based on historical U.S. market returns, a starting withdrawal rate of more than 4% per year has led to an undesirably high likelihood of running out of money over the course of a 30-year retirement."

'It's important to remember that the future will not look exactly like the past."

"There's a common belief in our culture that investing success is a function of a person's ability to successfully pick winning stocks. Fortunately, that idea is absolute nonsense."

"When you pick stocks, you're competing against full-time professional investors who have research and analysis resources that you can only dream of."

"It's counterintuitive to think that by not attempting to outperform the market, an investor can actually come out above average. But it's completely true. The math is indisputable."

"If you don't want to take the time to check, Vanguard's index funds are generally a good way to go."

"Because of their low costs, index funds consistently outperform the majority of their actively managed competitors."

"A fund's past performance (even over extended periods) is not a reliable way to predict future performance."

"Your tolerance for risk is the most important factor in determining an appropriate asset allocation."

"Assume that your stocks can lose 50% of their value at any time."

"In my own opinion, allocating anywhere from 20% to 40% of the stock portion of your portfolio to international index funds would be reasonable for most investors."

"Rebalancing helps to automate "buying low" and "selling High."

"So what, exactly, might a diversified, low-cost index fund portfolio look like? I'd argue that such a portfolio could be constructed using just three index funds: Vanguard Total Stock Market Index Fund, Vanguard Total International Stock Index Fund, and Vanguard Total Bond Market Index Fund."

"If you own a portion of each of the publicly traded companies in the United States (as well as a few thousand companies in other countries), you can be confident that, on the whole, those companies will earn a net profit. Over time, that profit will be returned to the shareholders in the form of dividend payments and increases in share values."

"No, I'm not on Vanguard's payroll. I recommend them so frequently simply because their funds are consistently among the lowest-cost available in each asset class."

"For investors using a "buy, hold, and rebalance" strategy, the differences between low-cost ETFs and low-cost index funds are slim. Your long-term success is unlikely to be affected either way as a result of the decision."

"One of the biggest developments in the field of investing in recent years is the invention of the target retirement fund."

"Do not pick a target retirement fund based on the date in the name. Pick based on the fund's asset allocation."

"If you're investing in a taxable account, target retirement funds are probably not the most tax-efficient way to invest."

"If you're investing in the stock market for any extended period of time, there's no question that you'll experience your share of bear markets."

"The financial media has a vested interest in sensationalizing market movements, whether upward or downward."

"The human tendency to believe that whatever has happened recently will continue to happen in the future is known as 'recency bias'."

"We have a natural human tendency not only to sell after a price decline, but to buy after a price increase.--precisely the opposite of what we should be doing."

"One of the most effective methods of avoiding the temptation to jump out of the market after a downturn is simply to avoid watching the market (and your account value) so closely."

"Rather than trying to predict the market's next movement, focus instead on maintaining as asset allocation that is appropriate for your risk tolerance and your investment time frame."

"Using the services of a trustworthy, well-informed financial advisor is one of the best things you can do to increase the likelihood of meeting your financial goals. Using a dishonest or poorly informed financial advisor is one of the fastest ways imaginable to make your money disappear."

"Be extremely wary of any claim by a financial advisor that he can reliably pick stocks or funds that will outperform a portfolio of low-cost index funds."

"With the exception of some minor maintenance tasks a couple times each year, your investments can (and should) be completely automated."

"Due to the huge number of mutual funds in existence, pure luck can account for the fact that there are always several funds with impressive-looking performance records."

"Whether it's an advertisement, a magazine article, or a financial advisor promoting a fund's performance record, do not expect the fund to beat the market just because it has done so in the past."

"Resist the temptation to change your portfolio just because of something you saw in the news. The best way to do that is to stop watching financial news programs and stop reading the financial section of the newspaper."

"Reliably predicting short-term market moves is impossible."

"Diversify your portfolio using an asset allocation that's appropriate for your risk tolerance; minimize your costs using low-cost index funds or ETFs, and rebalance your portfolio whenever it strays far from your desired allocation."

"If you're dissatisfied with your (book) purchase for any reason, let me know at mike@simplesubjects.com and I'll be happy to provide you with a refund."

Thank you, Mike Piper!

Best wishes.
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: "Investing Made Simple" -- A Gem

Postby Austex1 » Tue Mar 27, 2012 4:35 pm

I agree. I read the whole book and thought it was a great, easy-to-read explanation/reminder of the most important concepts related to investing.

Thanks, Mike! :happy

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Re: "Investing Made Simple" -- A Gem

Postby bertilak » Tue Mar 27, 2012 7:41 pm

Right after I read Mike's book I bought three more copies to give to my adult children.

It is surprising how much education and good advice is packed into that very readable little book.
I have a strong moral sense - by my standards. | -- Rex Stout

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Re: "Investing Made Simple" -- A Gem

Postby LadyGeek » Tue Mar 27, 2012 7:51 pm

I have a copy on my smartphone (Kindle for Android).

The book is now in the wiki: Taylor Larimore's Investment Gems

Background info: Mike Piper
To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

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Re: "Investing Made Simple" -- A Gem

Postby ObliviousInvestor » Tue Mar 27, 2012 7:53 pm

Thank you, everybody for your kind words. The support the Boglehead community has given me over the last couple years has been absolutely wonderful.
Mike Piper, author/blogger

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Re: "Investing Made Simple" -- A Gem

Postby Kevin M » Wed Mar 28, 2012 3:10 am

This has been my new favorite book to recommend to new investors since I read it several months ago. It is the simplest, shortest book that gets the most important points across.

Although I initially got it from the library, a few days ago I bought the Kindle Cloud version for my Chromebook, just to have as a reference to use to help me explain key investing concepts to others in simple terms. I find it extremely difficult to explain things simply, so Mike's book is a great model for that.

Most people I know won't read a book on investing. If they won't read this book, then there's no point in suggesting any others.

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