10-20-2002, 1:09 PM | Post #72102 |
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I have just finished reading a very good book titled, "Straight Talk on Investing" by the CEO of Vanguard. Burton Malkiel writes: "The advice is elegantly simple, eminently sensible, and delightfully readable." Here are examples:
"Making your wealth grow is not that difficult. It's really quite simple."
"Remember, it's in the interest of many financial services companies to make you think that investing is difficult."
"Your first priority is a disciplined saving program."
"Either you are a buy-and-hold investor, or you are a trader."
"It's extreamely rare to hear of anyone winning at it (market timing) over a period of years. Indeed, I've never heard of such a genius."
"Another habit to cultivate is to resist keeping score too often."
"With an index fund--the certainty of keeping up with the market is a very worthwhile trade-off for the possibility of beating it."
"The trend is not your friend."
"Compounding is the single most important force in the success of your investment program."
"When you save, compounding works for you. When you borrow, it works for the lender."
"Living below your means is the ultimate financial strategy."
"Know what you don't know."
"Hope for the best--but prepare for something less."
"To construct a sensible portfolio, you must first decide on the 'types' of investments--choosing the specific vehicles comes later."
"Many investors assume that they'll be able to recognize the point at which one market cycle ends and another begins, but in my experience, virtually no one can do so."
"If you decide to try to pick the right time to move your portfoio from stocks to bonds or from bonds to stocks, you are unlikely to get it right."
"The very first step in assembling an investment portfolio is to decide how to spread your dollars among stock, bond, and cash investments. -- Spend a lot of time on this decision--it is the most important one you will make."
"Lots of people in the financial business want you to believe success depends on shrewd stock picking or having the right mutual funds. But they're wrong."
"If there are three most important words in investing, they are diversification, diversification, diversification."
"I'm going to be blunt. Despite all that you read in the papers, most people should not attempt to invest in individual securities with their 'serious' money. Why, It's too risky."
"A broad stock market index fund, a broad bond market index fund, and a money market fund will give you everything you need."
"It is also possible to create a very well-diversified portfolio with as few an one or two funds."
"But over the long run, the returns of growth and value stocks have been pretty similar."
"It's what you keep (after costs and taxes) that counts."
"According to a 2002 study by the Financial Research Corporation -- expense ratios are the only factor than can be reliably linked to the future performance of mutual funds."
"You can minimize your tax bill in three ways: l. Resist the temptation to trade a lot; 2. Choose tax-efficient funds; 3. Use tax-deferred and taxable accounts wisely."
"The quickest way to make a small fortune is to start with a lartge fortune and trade it a lot."
"This approach is a model of simplicity, efficiency, and frugality--exposure to the entire U.S. market through an index fund charging, say, 0.20% of assets."
"Investing with simplicity is liberating because it lets you live your life."
"A portfolio that is a jumble of funds is not just an administrative headache; it's also likely to be costlier, less tax-efficient, and riskier than it needs to be."
"I'm going to be very blunt about two short-term strategies that don't work: frequent trading and market timing."
"Hold your investments for years or even decades--don't try to be a frequesnt trader."
"Frequent trading is speculating, not investing, and it's a game that's easier to lose than win."
"Don't count on a hot track record continuing."
"Quarterly (and even annual!) returns are largely menaingless if you are a long-term investor."
"For most of us, the biggest financial risk is that we'll outlive our savings."
"The point of rebalancing is to manage your risk, not to maximize your long-term returns."
"For most people, an annual rebalancing is adequate."
"up 100% and down 50% means you've gone nowhere."
"People tend to feel losses more acutely than gains."
"The key to successful investing is to get a few important things right and avoid making dangerous mistakes."
"It's different this time are said to be the four most dangerous words in investing."
"Research has shown repeatedly that the active traders underperform the buy-and-holders."
Originally posted in thread: 23602