This article contains details specific to United States (US) investors. Parts of it do not apply to non-US investors.
Main article: Bogleheads® investment philosophy
You need to save money to invest. This means spend less than you earn and have a sound financial lifestyle. If you can’t do that, read a good book on saving and budgeting, or consider this helpful Video: Start with a Sound Financial Lifestyle.
The Bogleheads® follow a small number of simple investment principles that have been shown over time to produce the best results. These ideas come from the investing philosophy of Vanguard-founder Jack Bogle. Some of these ideas are distilled from Nobel prize-winning financial economics research on topics like Modern Portfolio Theory and the Capital Asset Pricing Model. But they are really very easy to understand and to implement, and they work. In fact, the basis of all of these principles is the idea that successful investing is not a complicated process, and can be accomplished by anyone with a small amount of effort.
This article introduces these principles with short entertaining video segments to give investors the big picture and an orientation to the more detailed discussions in other wiki articles and in the recommended books.
Readers interested in pursuing these segments in more depth should see Bogleheads investing philosophy - video online course.
Introduction
This is an introduction and index to ten short explanatory videos about how to take control of your finances to achieve financial independence and enable your life dreams.
- To show subtitles, hover or tap video and then click on (CC).
- At end of video, next in playlist will immediately start.
Develop a workable Plan (Rule #1)
Your investment planning begins with some ballpark estimates of what kind of money you might need to accomplish your dreams. For many this seems formidable, so this video includes some popular guidelines that have helped many succeed in saving for these goals.
Invest early and often (Rule #2)
This short video illustrates the miracle of compound interest and the importance of starting to save early with a simple example of two young college graduates.
Never bear too much or too little risk (Rule #3)
The ratio of stocks and bonds you own is your key lever that controls the overall risk (variability) of your investments.
Diversify! (Rule #4)
It's not enough to own stocks of hundreds of companies (although easy with a mutual fund). Learn about the "magic" benefits of poorly correlated investments--most notably, owning both stocks and bonds.
An updated interactive version can be found here: Intro to Rule #4
Never try to time the market (Rule #5)
The vast majority of investors earn less than the market due to two common timing mistakes: buying yesterday's top performers, and letting your emotions cause you to attempt to predict the direction of the stock market.
Use index funds when possible (Rule #6)
Learn how to tell a good mutual fund from a bad one. What is an index fund? And why do they outperform in the long run?
Keep Costs Low (Rule #7)
Low costs are what make index funds outperform. Learn more.
Minimize taxes (Rule #8)
Take full advantage of tax-advantaged accounts, then keep your bonds there. Learn why, and more.
Keep it simple (Rule #9)
All things being equal, choose the simple path. You'll increase your chance of success, and have more time to enjoy your life. See how to bring all these points together into a simple written plan.
Stay the course (Rule #10)
Let there be no mistake: you are only human and you will face great temptation to change your plan. Your best defense (against yourself!) is to pull out your written plan and review it.
See also
- The Twelve Pillars of Wisdom
- Bogleheads® investment philosophy
- Vanguard's investment philosophy
- What the experts say about investing
External links
- Bogleheads® Investment Philosophy Videos: on Facebook, on the author's web site (FinancingLife.org)
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