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A Christmas Present for All Diehards
Taylor Larimore 12-20-2005, 10:24 AM | Post #162566 | 
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Hi Everyone:
Mel, Michael and I hope you enjoy these Investment Gems taken from our new book, "The Bogleheads' Guide to Investing":

"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."

"Acknowledgements: We wish to give special thanks to Morningstar for creating the Vanguard Diehards Forum, and Alex Frake and Larry Auton for creating the diehards.org website."

"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."

"Figure out approximately how much you might need for your retirement so you'll know if you're on track. One of the simpler online calculators you might want to try can be found at www.banksite.com/calc/retire."

"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% will double in 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."

"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."

"We believe that most portfolios will benefit from a 20 percent equity allocation in a broad-based international index fund."

"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

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