Index Fund Quotes

It’s not possible for investors to consistently outperform the market. Therefore you’re best served investing in a diversified portfolio of low-cost index funds [or exchange-traded funds].

The fight against climate change is often an opportunity for banks, financial institutions, and ratings agencies to develop a new marketing product, a new green bond, and a new net-zero tracker index fund as often as they can.

Hold an index fund for 20 years or more, adding new money every month, and you are all but certain to outper-forms the vast majority of professional and individual investors alike. Late in his life, Graham praised index funds as the best choice for individual investors, as does Warren Buffett.6

But the simple truth is this: the more complex an investment is, the less likely it is to be profitable. Index funds outperform actively managed funds in large part simply because actively managed funds require expensive active managers. Not only are they prone to making investing mistakes, their fees are a continual performance drag on the portfolio.

After adjusting the comparison of index funds to actively managed funds for survivorship bias, taxes, and loads, the dominance of index funds reaches insurmountable proportions. Once

Finding the next Warren Buffett is like looking for a needle in a haystack. We recommend that you buy the haystack instead, in the form of a low-cost index fund.

If you invested in a low-cost index fund--where you don't put the money in at one time, but average in over 10 years--you'll do better than 90% of people who start investing at the same time.

Two-thirds of professionally managed funds are regularly outperformed by a broad capitalization-weighted index fund with equivalent risk, and those that do appear to produce excess returns in one period are not likely to do so in the next. The record of professionals does not suggest that sufficient predictability exists in the stock market to produce exploitable arbitrage opportunities.

Here is the crux of the strategy: Instead of hiring an expert, or spending a lot of time trying to decide which stocks or actively managed funds are likely to be top performers, just invest in index funds and forget about it!

In the mutual fund industry, for example, the annual rate of portfolio turnover for the average actively managed equity fund runs to almost 100 percent, ranging from a hardly minimal 25 percent for the lowest turnover quintile to an astonishing 230 percent for the highest quintile. (The turnover of all-stock-market index funds is about 7 percent.)

Three things saved us: Our unwavering 50% savings rate. Avoiding debt. We’ve never even had a car payment. Finally embracing the indexing lessons Jack Bogle—the founder of The Vanguard Group and the inventor of index funds—perfected 40 years ago.

Would you believe me if I told you that there’s an investment strategy that a seven-year-old could understand, will take you fifteen minutes of work per year, outperform 90 percent of finance professionals in the long run, and make you a millionaire over time?   Well, it is true, and here it is: Start by saving 15 percent of your salary at age 25 into a 401(k) plan, an IRA, or a taxable account (or all three). Put equal amounts of that 15 percent into just three different mutual funds:   A U.S. total stock market index fund An international total stock market index fund A U.S. total bond market index fund.   Over time, the three funds will grow at different rates, so once per year you’ll adjust their amounts so that they’re again equal. (That’s the fifteen minutes per year, assuming you’ve enrolled in an automatic savings plan.)   That’s it; if you can follow this simple recipe throughout your working career, you will almost certainly beat out most professional investors. More importantly, you’ll likely accumulate enough savings to retire comfortably.

A Mind Is A Terrible Thing to Waste

When you look at the results on an after-fee, after-tax basis, over reasonably long periods of time, there's almost no chance that you end up beating the index fund.

How to Steal from Wall Street If you ever want to see a banker sweat, try this: walk into your bank, ask to see a salesperson, and ask to put your savings into index funds. It’s the funniest thing ever.

The index fund is a most unlikely hero for the typical investor. It is no more (nor less) than a broadly diversified portfolio, typically run at rock-bottom costs, without the putative benefit of a brilliant, resourceful, and highly skilled portfolio manager. The index fund simply buys and holds the securities in a particular index, in proportion to their weight in the index. The concept is simplicity writ large.

Stocks are the things to own over time. Productivity will increase and stocks will increase with it. There are only a few things you can do wrong. One is to buy or sell at the wrong time. Paying high fees is the other way to get killed. The best way to avoid both of these is to buy a low-cost index fund, and buy it over time. Be greedy when others are fearful, and fearful when others are greedy, but don’t think you can outsmart the market. “If a cross-section of American industry is going to do well over time, then why try to pick the little beauties and think you can do better? Very few people should be active investors.

If you buy an S&P 500 index fund, your investment is highly diversified and its performance will match that of 500 leading U.S. corporations' stocks. Is it possible to lose all of your money? Yes, but the odds of that happening are slim and none. If 500 leading U.S. corporations all have their stock prices plummet to zero, the value of your investment portfolio will be the least of your problems. An economic collapse of that magnitude would make the Great Depression look like Lifestyles of the Rich and Famous.

The best long-term results come from buying a big, well-diversified portfolio of financial securities, and trading as little as possible.

That’s when I realized it was really very simple. Index investing beats 85 percent of actively managed mutual funds.

Most individual investors would be better off in an index mutual fund.

Can you think of another business in the world that would continue to exist as a going concern even after it had been proven definitively—as John Bogle of Vanguard proved about the financial industry—that most of its products are vastly inferior to other, cheaper alternatives like index funds? I can’t. How about a business whose most prestigious firms have been caught defrauding their own customers not once, but over and over again? In the normal corporate world, would such a business not only continue to operate, but actually make more and more money every year? Of course not. It would be long dead by now. And yet deceiving its clients and foisting inferior and even fraudulent products on them is exactly how Wall Street stays in business!

Warren Buffett, chairman of Berkshire Hathaway and investor of legendary repute: "Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. Those following this path are sure to beat the net results (after fees and expenses) delivered by the great majority of investment professionals.

Broad-market indexes like S&P 500 must rise over the long term. The upward path is the only logical direction. Prices can be suppressed for a short period, but eventually, the index will continue its course.

Here’s a Reader’s Digest version of my approach. I select mutual funds that have had a good track record of winning for more than five years, preferably for more than ten years. I don’t look at their one-year or three-year track records because I think long term. I spread my retirement, investing evenly across four types of funds. Growth and Income funds get 25 percent of my investment. (They are sometimes called Large Cap or Blue Chip funds.) Growth funds get 25 percent of my investment. (They are sometimes called Mid Cap or Equity funds; an S&P Index fund would also qualify.) International funds get 25 percent of my investment. (They are sometimes called Foreign or Overseas funds.) Aggressive Growth funds get the last 25 percent of my investment. (They are sometimes called Small Cap or Emerging Market funds.) For a full discussion of what mutual funds are and why I use this mix, go to daveramsey.com and visit MyTotalMoneyMakeover.com. The invested 15 percent of your income should take advantage of all the matching and tax advantages available to you. Again, our purpose here is not to teach the detailed differences in every retirement plan out there (see my other materials for that), but let me give you some guidelines on where to invest first. Always start where you have a match. When your company will give you free money, take it. If your 401(k) matches the first 3 percent, the 3 percent you put in will be the first 3 percent of your 15 percent invested. If you don’t have a match, or after you have invested through the match, you should next fund Roth IRAs. The Roth IRA will allow you to invest up to $5,000 per year, per person. There are some limitations as to income and situation, but most people can invest in a Roth IRA. The Roth grows tax-FREE. If you invest $3,000 per year from age thirty-five to age sixty-five, and your mutual funds average 12 percent, you will have $873,000 tax-FREE at age sixty-five. You have invested only $90,000 (30 years x 3,000); the rest is growth, and you pay no taxes. The Roth IRA is a very important tool in virtually anyone’s Total Money Makeover. Start with any match you can get, and then fully fund Roth IRAs. Be sure the total you are putting in is 15 percent of your total household gross income. If not, go back to 401(k)s, 403(b)s, 457s, or SEPPs (for the self-employed), and invest enough so that the total invested is 15 percent of your gross annual pay. Example: Household Income $81,000 Husband $45,000 Wife $36,000 Husband’s 401(k) matches first 3%. 3% of 45,000 ($1,350) goes into the 401(k). Two Roth IRAs are next, totaling $10,000. The goal is 15% of 81,000, which is $12,150. You have $11,350 going in. So you bump the husband’s 401(k) to 5%, making the total invested $12,250.

I think it is time for a modern War Against Error. A deliberately heightened battle against cultivated ignorance, enforced silence, and metastasizing lies. A wider war that is fought daily by human rights organizations in journals, reports, indexes, dangerous visits, and encounters with malign oppressive forces. A hugely funded and intensified battle of rescue from the violence that is swallowing the dispossessed.

Monday ushers in a particularly impressive clientele of red-eyed people properly pressed into dry-cleaned suits in neutral tones. They leave their equally well-buttoned children idling in SUVs while dashing to grab double-Americanos and foamy sweet lattes, before click-clacking hasty escapes in ass-sculpting heels and polished loafers with bowl-shaped haircuts that age every face to 40. My imagination speed evolves their unfortunate offspring from car seat-strapped oxygen-starved fast-blooming locusts, to the knuckle-drag harried downtown troglodytes they’ll inevitably become. One by one I capture their flat-formed heads between index finger and thumb for a little crush-crush-crushing, ever aware that if I’m lucky one day their charitable contributions will fund my frown-faced found art project to baffle someone’s hallway.

they pale by comparison to the trading volumes of hedge funds, to say nothing of the levels of trading in exotic securities such as interest rate swaps, collateralized debt obligations, derivatives such as futures on commodities, stock indexes, stocks, and even bets on whether a given company will go into bankruptcy (credit default swaps). The aggregate nominal value of these instruments, as I noted in Chapter 1, now exceeds $700 trillion.

Speculators, meanwhile, have seized control of the global economy and the levers of political power. They have weakened and emasculated governments to serve their lust for profit. They have turned the press into courtiers, corrupted the courts, and hollowed out public institutions, including universities. They peddle spurious ideologies—neoliberal economics and globalization—to justify their rapacious looting and greed. They create grotesque financial mechanisms, from usurious interest rates on loans to legalized accounting fraud, to plunge citizens into crippling forms of debt peonage. And they have been stealing staggering sums of public funds, such as the $65 billion of mortgage-backed securities and bonds, many of them toxic, that have been unloaded each month on the Federal Reserve in return for cash.21 They feed like parasites off of the state and the resources of the planet. Speculators at megabanks and investment firms such as Goldman Sachs are not, in a strict sense, capitalists. They do not make money from the means of production. Rather, they ignore or rewrite the law—ostensibly put in place to protect the weak from the powerful—to steal from everyone, including their own shareholders. They produce nothing. They make nothing. They only manipulate money. They are no different from the detested speculators who were hanged in the seventeenth century, when speculation was a capital offense. The obscenity of their wealth is matched by their utter lack of concern for the growing numbers of the destitute. In early 2014, the world’s 200 richest people made $13.9 billion, in one day, according to Bloomberg’s billionaires index.22 This hoarding of money by the elites, according to the ruling economic model, is supposed to make us all better off, but in fact the opposite happens when wealth is concentrated in the hands of a few individuals and corporations, as economist Thomas Piketty documents in his book Capital in the Twenty-First Century.23 The rest of us have little or no influence over how we are governed, and our wages stagnate or decline. Underemployment and unemployment become chronic. Social services, from welfare to Social Security, are slashed in the name of austerity. Government, in the hands of speculators, is a protection racket for corporations and a small group of oligarchs. And the longer we play by their rules the more impoverished and oppressed we become. Yet, like

These new taxes and the nationalization of finance meant the U.S. government would soon be dealing with a healthy budget surplus. Universal health care, free public education through college, a living wage, guaranteed full employment, a year of mandatory national service, all these were not only made law but funded. They were only the most prominent of many good ideas to be proposed, and please feel free to add your own favorites, as certainly everyone else did in this moment of we-the-peopleism. And as all this political enthusiasm and success caused a sharp rise in consumer confidence indexes, now a major influence on all market behavior, ironically enough, bull markets appeared all over the planet. This was intensely reassuring to a certain crowd, and given everything else that was happening, it was a group definitely in need of reassurance. That making people secure and prosperous would be a good thing for the economy was a really pleasant surprise to them. Who knew?