The Bogleheads' Guide to Investing E-Book

Mel Lindauer

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 497

Veröffentlichungsjahr: 2014

Beschreibung

The irreverent guide to investing, Boglehead style The Boglehead's Guide to Investing is a DIY handbook that espouses the sage investment wisdom of John C. Bogle. This witty and wonderful book offers contrarian advice that provides the first step on the road to investment success, illustrating how relying on typical "common sense" promoted by Wall Street is destined to leave you poorer. This updated edition includes new information on backdoor Roth IRAs and ETFs as mainstream buy and hold investments, estate taxes and gifting, plus changes to the laws regarding Traditional and Roth IRAs, and 401k and 403b retirement plans. With warnings and principles both precisely accurate and grandly counterintuitive, the Boglehead authors show how beating the market is a zero-sum game. Investing can be simple, but it's certainly not simplistic. Over the course of twenty years, the followers of John C. Bogle have evolved from a loose association of investors to a major force with the largest and most active non-commercial financial forum on the Internet. The Boglehead's Guide to Investing brings that communication to you with comprehensive guidance to the investment prowess on display at Bogleheads.org. You'll learn how to craft your own investment strategy using the Bogle-proven methods that have worked for thousands of investors, and how to: * Choose a sound financial lifestyle and diversify your portfolio * Start early, invest regularly, and know what you're buying * Preserve your buying power, keeping costs and taxes low * Throw out the "good" advice promoted by Wall Street that leads to investment failure Financial markets are essentially closed systems in which one's gain garners another's loss. Investors looking for a roadmap to successfully navigating these choppy waters long-term will find expert guidance, sound advice, and a little irreverent humor in The Boglehead's Guide to Investing.

Leseprobe

Contents

Acknowledgments

Foreword

Introduction

Part I: Essentials of Successful Investing

Chapter One: Choose a Sound Financial Lifestyle

What’s Your Financial Lifestyle?

Take These Steps Before you Start Investing

Chapter Two: Start Early and Invest Regularly

The Magic is in the Compounding

This Above All: Saving is the Key to Wealth

Finding The Money to Invest

Summary: The Most Important Things

Chapter Three: Know What You’re Buying: Part One

Stocks

Bonds

Chapter Four: Know What You’re Buying: Part Two

Mutual Funds

Mutual Fund Management Styles

Annuities

Exchange-Traded Funds

What We’ve Learned

Chapter Five: Preserve Your Buying Power with Inflation-Protected Bonds

I Bonds

Tips

Summary: I Bond Versus Tips

Chapter Six: How Much Do You Need to Save?

Putting What We’ve Learned to Work

Chapter Seven: Keep It Simple

How Investing is Different from Most of Life

Index Investing: it Pays to Be Lazy

Why Indexing is So Effective

How to Buy Index Funds

Bogleheads and Actively Managed Funds

Chapter Eight: Asset Allocation

The Efficient Market Theory (EMT)

Modern Portfolio Theory

Designing Our Personal Asset Allocation Plan

Portfolio Guidelines

Chapter Nine: Costs Matter

Fees Covered by The Prospectus

Fees Not Covered by The Prospectus

Adding it All Together

Taking Advantage of Lower Costs

Low Cost as a Predictor

Conclusion

Chapter Ten: Taxes: Part One

The Devastating Impact of Taxes

How Mutual Funds are Taxed

Turnover and Taxes

Investing in Taxable Accounts

Bonds in Your Taxable Account

Chapter Eleven: Taxes: Part Two

Use Tax-Sheltered Accounts

Placing Funds for Maximum After-Tax Return

Tax-Savvy Ideas

Chapter Twelve: Diversification

Chapter Thirteen: Performance Chasing and Market Timing Are Hazardous to Your Wealth

Past Performance Does Not Predict Future Performance

Market Timing

Financial Newsletters

Financial Shows On TV

Wall $Treet Week

Financial Magazines

The Bogleheads Contest

Predicting Interest Rates

Stay The Course

Chapter Fourteen: Savvy Ways to Invest for College

Methods of Saving for College

Summary of College Savings Plans

Chapter Fifteen: How to Manage a Windfall Successfully

Windfalls are About a Whole Lot More Than Money

Chapter Sixteen: Do You Need an Advisor?

The Alphabet Soup of Financial Designations

Part II: Follow-Through Strategies to Keep You on Target

Chapter Seventeen: Track Your Progress and Rebalance When Necessary

Principles of Rebalancing

Assessing a Portfolio

When Should I Rebalance?

Market Forces

How to Rebalance

Other Rebalancing Considerations

Chapter Eighteen: Tune Out the “Noise”

The Great Wall Street Marketing Machine

What The Investment Media Don’t Want You to Know

The Three Biggest Lies—Wall Street Version

Separating Soothsayers from The Truth Sayers

Chapter Nineteen: Mastering Your Investments Means Mastering Your Emotions

Welcome to the Field of Behavioral Economics

Greed and Fear

How Smart People Make Bad Investment Decisions

Keeping Emotions in Check

How To Escape the Emotional Traps

Chapter Twenty: Making Your Money Last Longer Than You Do

The Retiree’s Spending Dilemma

The Two Best Ways to Insure Income for Life

Three More Ways to Ensure Income for Life

A Prudent Plan for Tapping Your Portfolio

Chapter Twenty-One: Protect Your Assets by Being Well-Insured

Common Insurance Mistakes

Three Key Rules for Being Properly Insured

Life Insurance

Health Care

Long-Term Disability Coverage

Protecting Your Property

Long-Term Care

Locating Good Insurance Companies and Agents

Chapter Twenty-Two: Passing It On When You Pass On

Documents We’ll Need

Other Considerations

Gifting

Letter of Instruction

Disclaimer

Chapter Twenty-Three: You Can Do It

What We’ve Learned

Help From the Bogleheads

In Closing

Appendices

Appendix I: Glossary of Financial Terms

Appendix II: Books We Recommend

Appendix III: Financial Websites We Recommend

Appendix IV: Vanguard Asset Allocation Questionnaire and Pie Charts

About the Authors

Index

End User License Agreement

List of Illustrations

Figure 5.1 T-Bill Returns

Figure 6.1 Online Calculator for Required Savings for Retirement

List of Tables

Table 3.1 Owning Individual Bonds

Table 3.2 Owning Bond Mutual Funds

Table 5.1 Effects of Inflation over Various Time Periods

Table 5.2 Real After-Tax Return of $1,000 1% I Bond and $1,000 1.5% I Bond with 2% Inflation over Different Time Periods

Table 5.3 Real After-Tax Return of $1,000 1% I Bond and $1,000 1.5% I Bond with 4% Inflation over Different Time Periods

Table 5.4 Real After-Tax Return of $1,000 1.8% I Bond and $1,000 2.0% I Bond with 4% Inflation over Different Time Periods

Table 5.5 I Bond Fixed-Rate History

Table 5.6 $1,000 1% Bond versus $1,000 1.5% 10-Year TIPS

Table 5.7 $1,000 1% I Bond versus $1,000 1.75% 20-Year TIPS

Table 6.1 Estimated Returns

Table 6.2 Five Years to Retirement

Table 6.3 Ten Years to Retirement

Table 6.4 Fifteen Years to Retirement

Table 6.5 Twenty Years to Retirement

Table 6.6 Twenty-Five Years to Retirement

Table 6.7 Thirty Years to Retirement

Table 8.1 Annualized Returns of Large Domestic Stocks for Different Time Periods 1935–2013

Table 8.2 Worst Annual Loss Based on Stock/Bond Allocation (1926–2012)

Table 8.3 Vanguard Total Stock Market Index Fund Breakdown (February 2014)

Table 8.4 Comparison of Domestic Index versus International Index Returns

Table 8.5 Comparison of Annual Returns for VBMFX and VIPSX

Table 10.1 Relative Tax Efficiency Ranking for Major Asset Classes

Table 11.1 Comparison of Traditional and Roth IRAs

Table 11.2 Results of Fund Placement with Stocks in Taxable Account

Table 11.3 Results of Fund Placement with Bonds in Taxable Account

Table 12.1 Correlation to Dow Jones U.S. Total Stock Market Index (as of 11/30/2013)

Table 12.2 Sample of a Five-Year

R

-squared Fund Table

Table 13.1 Best and Worst Asset Classes, 1994–2004

Table 13.2 Investing Based on

The Granville Market Letter

Table 13.3 Wall Street Experts’ 2002 Predictions

Table 13.4 Buy-and-Hold Investing versus Active Trading

Table 14.1 Expected Lifetime Earnings per Education Level

Table 16.1 Professional Designations and Their Acronyms

Table 17.1 Effect of Market Forces on Returns: Stocks Up

Table 17.2 Effect of Market Forces on Returns: Stocks Down

Table 17.3 Changes Needed to Rebalance Portfolio

Table 21.1 Computing How Much Life Insurance You Need

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Guide

Cover

Table of Contents

Begin Reading

ADDITIONAL PRAISE FOR THE BOGLEHEADS’ GUIDE TO INVESTING

“This book is written with great charm, wit, and humility by a troika of retired, self-educated investors who themselves have become experts in financial planning and investing. Here they share what they have learned at the school of hard knocks. It is to trust the wisdom of their chosen mentor, John Bogle, who advocates investing in low cost, tax efficient mutual funds and using common sense in all financial decisions. Furthermore, the authors have mastered the complexities of their subject to the point where they can explain financial concepts simply and clearly. Readers and clients often ask me to recommend a book on financial planning investing. I will recommend this one.”

—Kay H. Kamin, president of Sutton Place Financial Inc. and financial columnist for Today’s Chicago Woman

“The Bogleheads’ Guide offers up the distilled wisdom from thousands of posts on the web’s most distinguished investment board. The authors mix a heady brew of down-home common sense and advanced financial economics, while providing a clear, concise, and easily followed action plan that is highly effective, low cost, low risk, and low maintenance. Read and profit!”

—Frank Armstrong, III, CFP, president, Investor Solutions, Inc.

“From beginning investors to those in retirement, The Bogleheads’ Guide to Investing is packed with simple and sophisticated investment advice, offering an abundance of resources for a winning investment strategy. It is written with wit, clarity, and wisdom, and is sure to become a treasured resource for long-term investors.”

—Bill Schultheis, author, The Coffeehouse Investor

The Bogleheads’ Guide to Investing

Second Edition

Mel Lindauer

Taylor Larimore

Michael LeBoeuf

Foreword by John C. Bogle

Cover image: © iStock.com / ImpaKPro

Cover design: Wiley

Copyright © 2014 by Taylor Larimore, Mel Lindauer, and Michael LeBoeuf.

All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

The First Edition was published by John Wiley & Sons, Inc. in 2006. It was then published as a paperback edition in 2007.

Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, [phone], fax [phone], or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, [phone], fax [phone], or online at www.wiley.com/go/permissions.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at [phone], outside the United States at [phone] or fax [phone].

Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com.

Library of Congress Cataloging-in-Publication Data:

ISBN 978-1-118-92128-9 (Hardcover)

ISBN 978-1-118-92235-4 (ePDF)

ISBN 978-1-118-92236-1 (ePub)

To John C. Bogle, founder of The Vanguard Group

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.

Acknowledgments

Anyone who writes a book knows that many more people than the authors are responsible for turning an idea into the finished product. In bringing this particular book to fruition, we wish to acknowledge and give special thanks to the following people:

Bill Falloon, our editor at John Wiley & Sons, who proposed the idea of a Bogleheads’ book to Taylor and wouldn’t take no for an answer.

Alexis Hurley, for being an excellent and supportive agent.

Rick Ferri, for the countless hours and invaluable assistance he provided critiquing the chapters and checking figures to make this a better, more accurate book. He is a quality person and a true friend.

Boglehead Bob Beeman, for his original work on the after-tax, real returns of I Bonds.

Excel wizard Alec Stanley, for his work in expanding on Bob Beeman’s original work and for providing other valuable spreadsheet assistance to us whenever we asked for it (and that was often).

Morningstar for creating the Vanguard Diehards Forum, and Alex Frakt and Larry Auton for creating the

bogleheads.org

website. Also, special thanks to Ralph Arveson for our Bogleheads contest and Bogleheads Local Chapter websites.

All those who showed so much enthusiasm for the book and offered encouragement, which made all of our hard work seem worthwhile. (You know who you are.)

Last, and certainly not least, we want to thank our wives, Pat Larimore (deceased), Marlene Lindauer, and Elke LeBoeuf for their patience and understanding during the long hours we spent working on our computers preparing this labor of love.

Foreword

Nothing is more deserving of your attention than the intellectual and moral associations of Americans. Americans of all ages, all conditions, and all dispositions constantly form associations [of a] thousand kinds . . . religious, moral, serious, futile, general or restricted, enormous or diminutive. I have often admired the extreme skill with which the inhabitants of the United States succeed in proposing a common object for the exertions of a great many men and inducing them voluntarily to pursue it.