Mutual Funds Investment Quotes

Half of all U.S. mutual fund portfolio managers do not invest a cent of their own money in their funds, according to Morningstar.69 This might seem atrocious, and surely the statistic uncovers some hypocrisy.

If you keep a $495 car payment throughout your life, which is “normal,” you miss the opportunity to save that money. If you invested $495 per month from age twenty-five to age sixty-five, a normal working lifetime, in the average mutual fund averaging 12 percent (the eighty-year stock market average), you would have $5,881,799.14 at age sixty-five. Hope you like the car!

And of course Brian was far more upset about separation from those two blond moppets than about leaving Louise. There shouldn't be any problem loving both, but for some reason certain men choose; like good mutual-fund managers minimizing risk while maximizing portfolio yield, they take everything they once invested in their wives and sink it into their children instead. What is it? Do they seem safer, because they need you? Because you can never become their ex-father, as I think I might become your ex-wife?

If you invest $464 in a good mutual fund every month from age thirty to age seventy, you’ll end up with more than $5 million.

The most popular investing products are the worst ones for investors.

Focus on being productive instead of busy.

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.)

The average monthly student loan payment for someone in their twenties is $351.15 If that student avoided student loans, started his or her career without that payment, and invested that $351 into a mutual fund every month instead, they’d have almost $3 million by age 65.16

The simple fact is that selecting a mutual fund that will outpace the stock market over the long term is, using Cervantes’ wonderful observation, like “looking for a needle in the haystack.” So I offer you Bogle’s corollary: “Don’t look for the needle in the haystack. Just buy the haystack!

Slavery is not a horror safely confined to the past; it continues to exist throughout the world, even in developed countries like France and the United States. Across the world slaves work and sweat and build and suffer. Slaves in Pakistan may have made the shoes you are wearing and the carpet you stand on. Slaves in the Caribbean may have put sugar in your kitchen and toys in the hands of your children. In India they may have sewn the shirt on your back and polished the ring on your finger. They are paid nothing. Slaves touch your life indirectly as well. They made the bricks for the factory that made the TV you watch. In Brazil slaves made the charcoal that tempered the steel that made the springs in your car and the blade on your lawnmower. Slaves grew the rice that fed the woman that wove the lovely cloth you've put up as curtains. Your investment portfolio and your mutual fund pension own stock in companies using slave labor in the developing world. Slaves keep your costs low and returns on your investments high.

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.

Mandatory allocation of capital between bonds and stocks by mutual funds creates tremendous short-term opportunities for investors.

The greatest fear of a professional investor, who manages money for a living, is capital withdrawals at the wrong time.

Money managers tend to make irrational decisions just to protect their calendar year performances, even if they believe that decision is not in the best interest of investors.

Annual performance means nothing to individual investors.

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

Rich people think long-term. they balance their spending on enjoyment today with investing for freedom tommorow

Rich people think long term. they balance their spending on enjoyment today with investing fore freedom tomorrow.

Opportunities don't just happen. You create them

If she were to invest $3,500 in a mutual fund averaging 12 percent, upon an average death age of seventy-eight, Sara’s mutual fund would be worth $368,500!

One of the problems with a 529 plan is that you must give up an element of control. The best 529 plans available, and my second choice to an ESA, is a “flexible” plan. This type of plan allows you to move your investment around periodically within a certain family of funds. A family of funds is a brand name of mutual fund. You could pick from virtually any mutual fund in the American Funds Group or Vanguard or Fidelity. You are stuck in one brand, but you can choose the type of fund, the amount in each, and move it around if you want. This is the only type of 529 I recommend.

Most of us know how much we earn every month, but not many of us are clear about where our money gets spent. This exercise should show you clearly how you should manage your finances to achieve your goals.

Even for taxable clients, mutual fund managers supervised the assets in very much the same way, simply ignoring the tax impact and passing the tax liability through to largely unsuspecting fund shareholders.

I suggest a Money Market account with no penalties and full check-writing privileges for your emergency fund. We have a large emergency fund for our household in a mutual-fund company Money Market account. Wherever you get your mutual funds, look at the website to find Money Market accounts that pay interest equal to one-year CDs. I haven’t found bank Money Market accounts to be competitive. The FDIC does not insure the mutual-fund Money Market accounts, but I keep mine there anyway because I’ve never known one to fail. Keep in mind that the interest earned is not the main thing. The main thing is that the money is available to cover emergencies. Your wealth building is not going to happen in this account; that will come later, in other places. This account is more like insurance against rainy days than it is investing.

Diversification, the easy accessibility of funds, and having a skilled professional money manager working to make your investment grow are the three most prominent reasons that mutual funds have become so popular.

With real assets, everything is different. The price of real estate, like the price of shares of stock or parts of a company or investments in a mutual fund, generally rises at least as rapidly as the consumer price index.

Investment Owner’s Contract I, _____________ ___________________, hereby state that I am an investor who is seeking to accumulate wealth for many years into the future. I know that there will be many times when I will be tempted to invest in stocks or bonds because they have gone (or “are going”) up in price, and other times when I will be tempted to sell my investments because they have gone (or “are going”) down. I hereby declare my refusal to let a herd of strangers make my financial decisions for me. I further make a solemn commitment never to invest because the stock market has gone up, and never to sell because it has gone down. Instead, I will invest $______.00 per month, every month, through an automatic investment plan or “dollar-cost averaging program,” into the following mutual fund(s) or diversified portfolio(s): _________________________________, _________________________________, _________________________________. I will also invest additional amounts whenever I can afford to spare the cash (and can afford to lose it in the short run). I hereby declare that I will hold each of these investments continually through at least the following date (which must be a minimum of 10 years after the date of this contact): _________________ _____, 20__. The only exceptions allowed under the terms of this contract are a sudden, pressing need for cash, like a health-care emergency or the loss of my job, or a planned expenditure like a housing down payment or a tuition bill. I am, by signing below, stating my intention not only to abide by the terms of this contract, but to re-read this document whenever I am tempted to sell any of my investments. This contract is valid only when signed by at least one witness, and must be kept in a safe place that is easily accessible for future reference.

Do not ridicule my effort. Everybody likes a comedian’s company. That’s why they give them tips after watching the show, not their hard earned money for a mutual fund investment. Give him tips, not your heart. I guess you understand the difference.

By buying a share in a “total market” index fund, you acquire an ownership share in all the major businesses in the economy. Index funds eliminate the anxiety and expense of trying to predict which individual stocks, bonds, or mutual funds will beat the market.

The creation of Vanguard and its truly mutual (fund-shareholder-owned) structure has been the so-far-single counterexample to this pattern. I explain why this structure has worked so well, and why it must ultimately become the dominant structure in the industry.

suggest funding college, or at least the first step of college, with an Educational Savings Account (ESA), funded in a growth-stock mutual fund. The Educational Savings Account, nicknamed the Education IRA, grows tax-free when used for higher education. If you invest $2,000 a year from birth to age eighteen in prepaid tuition, that would purchase about $72,000 in tuition, but through an ESA in mutual funds averaging 12 percent, you would have $126,000 tax-free. The ESA currently allows you to invest $2,000 per year, per child, if your household income is under $220,000 per year. If you start investing early, your child can go to virtually any college if you save $166.67 per month ($2,000/year). For most of you, Baby Step Five is handled if you start an ESA fully funded and your child is under eight. If your children are older, or you have aspirations of expensive schools, graduate school, or PhD programs that you pay for, you will have to save more than the ESA will allow. I would still start with the ESA if the income limits don’t keep you out. Start with the ESA because you can invest it anywhere, in any fund or any mix of funds, and change it at will. It is the most flexible, and you have the most control.

Truth doesn’t screw around, and truth doesn’t care about your opinions. It doesn’t care if you believe in it, deny it, or ignore it. It couldn’t care less what religion you are, what country you’re from, what color your skin is, what or who you’ve got between your legs, or how much you’ve got invested in mutual funds. None of the trivial junk that concerns most people most of the time matters even one teensy-weensy bit to the truth.

This state of affairs, which bodes ill for the future, causes Us great distress and anguish. But We cherish this hope: that distrust and selfishness among nations will eventually be overcome by a stronger desire for mutual collaboration and a heightened sense of solidarity. We hope that the developing nations will take advantage of their geographical proximity to one another to organize on a broader territorial base and to pool their efforts for the development of a given region. We hope that they will draw up joint programs, coordinate investment funds wisely, divide production quotas fairly, and exercise management over the marketing of these products. We also hope that multilateral and broad international associations will undertake the necessary work of organization to find ways of helping needy nations, so that these nations may escape from the fetters now binding them; so that they themselves may discover the road to cultural and social progress, while remaining faithful to the native genius of their land.

MYTH: Car payments are a way of life; you’ll always have one. TRUTH: Staying away from car payments by driving reliable used cars is what the average millionaire does; that is how he or she became a millionaire. Taking on a car payment is one of the dumbest things people do to destroy their chances of building wealth. The car payment is most folks’ largest payment except for their home mortgage, so it steals more money from the income than virtually anything else. The Federal Reserve notes that the average car payment is $495 over sixty-four months. Most people get a car payment and keep it throughout their lives. As soon as a car is paid off, they get another payment because they “need” a new car. If you keep a $495 car payment throughout your life, which is “normal,” you miss the opportunity to save that money. If you invested $495 per month from age twenty-five to age sixty-five, a normal working lifetime, in the average mutual fund averaging 12 percent (the eighty-year stock market average), you would have $5,881,799.14 at age sixty-five. Hope you like the car!

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.

Data sliced sufficiently finely begin once again to tell stories. The top 1 percent of the income distribution—representing household incomes in excess of roughly $475,000—comprises only about 1.5 million households. If one adds up the numbers of vice presidents or above at S&P 1500 companies (perhaps 250,000), professionals in the finance sector, including in hedge funds, venture capital, private equity, investment banking, and mutual funds (perhaps 250,000), professionals working at the top five management consultancies (roughly 60,000), partners at law firms whose profits per partner exceed $400,000 (roughly 25,000), and specialist doctors (roughly 500,000), this yields perhaps 1 million people. These are surely not all one-percenters, but they are all plausibly parts of the top 1 percent, and this group might comprise half—a sizable share—of 1 percent households overall. At the very least, the people in these known and named jobs constitute a material, rather than just marginal or eccentric, part of the top 1 percent of the income distribution. They are also, of course, the people depicted in journalistic accounts of extreme jobs—the people who regularly cancel vacation plans, spend most of their time on the road, live in unfurnished luxury apartments, and generally subsume themselves in work, encountering their personal lives only occasionally, and as strangers.

The first concerns how an investor should choose among different types of broad-based index funds. The best-known of the broad stock market mutual funds and ETFs in the United States track the S&P 500 index of the largest stocks. We prefer using a broader index that includes more smaller-company stocks, such as the Russell 3000 index or the Dow-Wilshire 5000 index. Funds that track these broader indexes are often referred to as “total stock market” index funds. More than 80 years of stock market history confirm that portfolios of smaller stocks have produced a higher rate of return than the return of the S&P 500 large-company index. While smaller companies are undoubtedly less stable and riskier than large firms, they are likely—on average—to produce somewhat higher future returns. Total stock market index funds are the better way for investors to benefit from the long-run growth of economic activity.

The math is revealing. The typical American with a $50,000 annual income would normally have an $850 house payment and a $495 car payment, with an additional $180 payment on the second car. Then there is a $165 student-loan payment; and the average credit-card debt is about $12,000, making those monthly payments around $185 per month. Also, this typical household will have other miscellaneous debt on things like furniture, stereos, or personal loans on which they pay an additional $120. All these payments total $1,995 per month. If this family were to invest that instead of sending it to the creditors, they would be cash mutual-fund millionaires in just fifteen years! (After fifteen years, it gets really exciting. They’ll have $2 million in five more years, $3 million in three more years, $4 million in two and a half more years, and $5.5 million in two more years. So they will have $5.5 million after twenty-eight years.) Keep in mind, this is with an average income, which means many of you make more than this!

IRA funds became a form of play money for the middle class... Because the pool of capital that made up an IRA could not be withdrawn for twenty or thirty years, many people viewed their IRAs as containing money they could experiment with. They could use an IRA to buy their first stock or their first mutual fund. They could put in in a money market fund first, and then, as they got bolder - and the bull market became more irresistible - shift some of it into something a little riskier. IRAs gave people a way to try on the stock and bond markets for size, to see how they felt, and to become slowly comfortable with the idea of investing. The knowledge that the money couldn't easily be withdrawn acted as a psychological safety net, allowing investors to feel as though they could take a chance or two. If they made a mistake, they reasoned, there was still time to recoup - several decades, perhaps.Over time, many people came to believe that it as imperative to maximize the returns they were getting on their IRA account, even at the risk of taking a loss. How else would they ever have enough to retire on? This, surely, is the classic definition of investment capital.

The math is revealing. The typical American with a $50,000 annual income would normally have an $850 house payment and a $495 car payment, with an additional $180 payment on the second car. Then there is a $165 student-loan payment; and the average credit-card debt is about $12,000, making those monthly payments around $185 per month. Also, this typical household will have other miscellaneous debt on things like furniture, stereos, or personal loans on which they pay an additional $120. All these payments total $1,995 per month. If this family were to invest that instead of sending it to the creditors, they would be cash mutual-fund millionaires in just fifteen years! (After fifteen years, it gets really exciting. They’ll have $2 million in five more years, $3 million in three more years, $4 million in two and a half more years, and $5.5 million in two more years. So they will have $5.5 million after twenty-eight years.) Keep in mind, this is with an average income, which means many of you make more than this! If you are thinking that you don’t have that many payments so your math won’t work, you missed the point. If you make $50,000 and have fewer payments, you have a head start, since you already have more control of your income than most people.

Unconventional Success: A Fundamental Approach to Personal Investment recommends that investors engage not-for-profit fund management companies to create broadly diversified, passively managed portfolios. Note that most mutual-fund assets rest under the control of for-profit management companies. Not-for-profits represent a contrarian alternative. Note that most individuals’ portfolios contain result-dominating allocations to domestic marketable securities. True diversification represents a contrarian alternative. Note that most mutual funds attempt to beat the market. Market-mimicking strategies represent a contrarian alternative.

Fortunately for investors, two substantial funds management organizations adhere to high fiduciary standards, adopted in the context of corporate cultures designed to serve investor interests. Vanguard and TIAA-CREF both operate on a not-for-profit basis, allowing the companies to make individual investor interests paramount in the funds management process. By emphasizing high-quality delivery of low-cost investment products, Vanguard and TIAA-CREF provide individual investors with valuable tools for the portfolio construction process. Ultimately, a passive index fund managed by a not-for-profit investment management organization represents the combination most likely to satisfy investor aspirations. Following Mies van der Rohe’s famous dictum—“less is more”—the rigid calculus of index-fund investing dominates the ornate complexity of active fund management. Pursuing investment with a firm devoted solely to satisfying investor interests unifies principal and agent, reducing the investment equation to its most basic form. Out of the enormous breadth and complexity of the mutual-fund world, the preferred solution for investors stands alone in stark simplicity.

Let’s assume someone puts $10,000 in a mutual fund, leaves it there 20 years, and gets an average annual return of 10 percent. If the fund had an expense ratio of 1.5 percent, the fund is worth $49,725 at the end of 20 years. However if the fund had an expense ratio of 0.5 percent, it would be worth $60,858 at the end of 20 years. Just a 1 percent difference in expenses makes an 18 percent difference in returns when compounded over 20 years.

The expense ratio of each mutual fund is available from the mutual fund company, from Morningstar, and it’s sometimes included in newspapers and other sources of mutual fund performance data.

Ever heard of collateralized debt obligations? Mortgage-backed securities? Non-bank asset-backed commercial paper? What about income trusts? Or even mutual funds?

Why would anyone want to invest in mutual funds through an annuity? Because annuity products have special tax benefits, and the money inside can grow tax-deferred, just like a 401(k) or IRA.

Most investors are probably better off starting with the SPY, since you can invest as little as a few hundred dollars. Currently, to invest in the Vanguard 500 mutual fund, you will need to have at least $3,000.

When a fund manager doesn’t have to constantly worry about having enough cash or liquid assets on hand to meet constant redemptions (as is the case with regular mutual funds), she can take a long-term view. That lets her buy alternative assets like commercial real estate, real estate debt, and shares in high-end private investment funds.

Then come the fees: virtually all interval funds charge a sales fee (or “front-end load”) when you buy shares, and those fees typically hover around 5.25 percent. So if you invested $1,000 in a real estate interval fund, you only end up buying $947.50 worth of shares (and paying a sales charge of $52.50). With most funds, you’ll also pay a redemption fee (usually around 2 percent) when you sell your shares. Interval funds also charge more in ongoing fees than managed mutual funds (and substantially more than ultra-low fee index funds). The ongoing expense ratios range from about 2.25 percent to more than 5 percent annually. So for every $1,000 you have invested, you could pay more than $50 in annual fees.

MBS can be harder to buy and sell than other types of bonds, as they’re bought mainly by institutional investors. Many MBS are issued and sold in large denominations (like $25,000 minimums), but some are issued at $1,000 (like most other types of bonds). You can trade MBS through specialty bond brokers, which you can find at most major brokerages (like Charles Schwab or Merrill Edge). The easiest way to invest in MBS is through specialty mutual funds or ETFs. Though technically MBS are not fixed-income investments (because the payments can vary monthly), they’re usually included in that category (because they’re bonds).

And that is why, when attempting to balance and evaluate their investment port-folio, people often err by failing to knock down mental walls among accounts. As a result, their true portfolio mix—the combination of stocks, bonds, real estate, insurance policies, mutual funds, and the like—is often not what they think, and their investment performance often suffers.

Examples of real estate mutual funds include: • Fidelity Real Estate Investment Portfolio (FRESX), a managed fund (so expect a higher expense ratio) that selects REITs with high-quality properties (mainly commercial and industrial) • Cohen & Steers Realty Shares (CSRSX), a managed fund that holds a targeted portfolio of forty to sixty commercial REITs • Vanguard Real Estate Index Fund Admiral Shares (VGSLX), a low-cost index fund that tracks a key REIT benchmark index (called the MSCI US Investable Market Real Estate 25/50 Index) • Cohen & Steers Quality Income Realty Fund (RQI), a closed-end fund that holds a variety of high-income-producing commercial REITs and real estate–related stocks

• Loads are sales charges that kick in when you buy (front-end load) or sell (back-end load) open-end mutual fund shares. • Expense ratio refers to ongoing fees for the fund, which range from 0.09 percent to more than 3 percent; lower fees are associated with index funds, higher fees with managed funds. • Minimum investment requirement for open-end funds typically ranges from $500 to $3,000 for the initial investment only. • NAV (net asset value) equals the total current value of all assets held by the fund minus any outstanding liabilities divided by the total number of outstanding shares [(assets – liabilities)/shares].

He smiled again and grabbed my arm. “It so simple,” he said. Indexing is the way to go. Invest in great American businesses without paying all the fees of a mutual fund manager and hang on to those companies, and you will win over the long term!

Real Estate Investment Trusts, or REITs (pronounced “reets”), are companies that own and collect rent from commercial and residential properties.10 Bundled into real-estate mutual funds, REITs do a decent job of combating inflation. The best choice is Vanguard REIT Index Fund; other relatively low-cost choices include Cohen & Steers Realty Shares, Columbia Real Estate Equity Fund, and Fidelity Real Estate Investment Fund.11 While a REIT fund is unlikely to be a foolproof inflation-fighter, in the long run it should give you some defense against the erosion of purchasing power without hampering your overall returns.

Indexing via low-cost mutual funds is a strategy that will, over time, most likely outperform the vast majority of strategies.

Throughout this book we’ll gradually build an argument that many individuals should consider an automatic approach to investing by relying primarily on mutual funds—specifically index mutual funds, which try to do nothing more than mimic the performance of the stock and bond markets in general.

Yet there are still 100 million people invested in actively managed mutual funds. How is that humanly possible? JB: Well, never underestimate the power of marketing.

Buffett is the Darwin of investing—he changed the field forever and for the better. But if eminent scientists in the late nineteenth and early twentieth centuries could barely comprehend the power of cumulative growth, how can investors, who by and large are much more intellectually challenged, be expected to appreciate it? But the problem is worse than you think. Not only do investors blithely ignore Buffett, their behavior over the last fifty years indicates that they firmly believe the exact opposite! The holding period of stocks by mutual funds has fallen to less than a year from seven years in 1960.

Mutual funds are pools of money that typically are invested in stocks or bonds. If you have a retirement account, there’s a very good chance that you are an investor in one or more mutual funds. When investors buy shares in a mutual fund, they are actually buying an ownership stake in all the stocks or bonds (or both) that the fund owns. The value of the mutual fund shares rises and falls every day with the value of the stocks and bonds in the fund.

Brown and Bent wanted to create a mutual fund that would feel like money in the bank—not like an investment in stocks or bonds. They wanted it to have all the convenience of a checking account, but with a higher interest rate for savers. So they made a few tweaks to the mutual fund model.

Investors would buy shares in their fund. The fund would then take investors’ money and lend it out—to the government, in the form of Treasury bills, and to banks, in the form of big savings accounts. These were short-term, ultra-safe investments. So safe, in fact, that the price of the mutual fund shares didn’t need to fluctuate every day like funds that owned stocks or riskier bonds.

But the Reserve Fund was not a normal mutual fund. It was a money-market fund. Despite the standard warnings that the fund might lose money, people did not think of their money in the fund as an investment. They thought of their money in the fund as their money. You put in a dollar, you get back a dollar whenever you want it. If the fund were to lose 1 percent of its value, investors wouldn’t get all their money back. This, for a money-market fund, is a disaster known as “breaking the buck.

Individual investors have significant advantages over professional money managers. Retail investors, like you and I, have nobody to report. We have no benchmark to beat and have no fear of capital flight. There are no quarter and year ends, and performance is not linked to calendars.

The market’s long-term trajectory is upward, which is the only direction the market can go over a long period.

Capital withdrawals by investors can torpedo investment strategies of money managers at the worst possible time.

Professional money managers are worried about their annual results and may take irrational decisions to protect their performance record. Individual investors have nobody to report, and yearly performance does not mean anything to them.

Putting up to a third of your stock money in mutual funds that hold foreign stocks (including those in emerging markets) helps insure against the risk that our own backyard may not always be the best place in the world to invest.

The correct period to judge performance is from a market peak to another peak or at least to the next all-time high.

Buying a mutual fund or ETF does not automatically make you a passive investor. If your mutual fund is actively managed, you are an active investor.

If you are incredibly talented and extremely lucky, you will beat the market most of the time. Everybody else will be better off investing in low-cost broad-market index funds.

YouTube also contains a treasure trove of lectures by nearly all of finance’s leading lights, strewn throughout its vast wasteland of misinformation. Tread carefully. A few wrong clicks and you’ll wind up with a QAnon conspiracist or a crypto bro. Of the names I’ve mentioned in this book, I’d search for John Bogle, Eugene Fama, Kenneth French, Jonathan Clements, Zvi Bodie, William Sharpe, Burton Malkiel, Charles Ellis, and Jason Zweig. Worthwhile finance podcasts abound. Start with the Economist’s weekly “Money Talks” and NPR’s Planet Money, although most of the latter’s superb coverage revolves around economics and relatively little around investing. Rick Ferri’s Boglehead podcast interviews cover mainly passive investing. Another financial podcast I highly recommend is Barry Ritholtz’s Masters in Business from Bloomberg. Podcasts are a rapidly evolving area. Lest you wear your ears out, you’ll need discretion to curate the burgeoning amount of high-quality audio. Research mutual funds. All the fund companies discussed in this book have sophisticated websites from which basic fund facts, such as fees and expenses, can be obtained, as well as annual and semiannual reports that list and tabulate holdings. If you’re researching a large number of funds, this gets cumbersome. The best way is to visit Morningstar.com. Use the site’s search function to locate the main page for the fund you’re interested in and click the “Expense” and “Portfolio” tabs to find the fund expense ratio and detailed data on the fund holdings. Click the “Performance” tab to see the fund’s return over periods ranging from a single day up to 15 years, and the “Chart” tab to compare the returns of multiple funds over a given interval. ***

The decision to develop a saving rather than a smoking habit makes a huge difference. One way, she puts $2,000 a year into Newports and, at age 65, has cancer. The other way, she puts it into a mutual fund that compounds at 7.5% a year and, at 65, has $1 million.

Bank accounts can have a “pay on death” designation that gives you exclusive control of the account during your lifetime but only requires presentation of a death certificate to be transferred to your intended without probate. Just ask the bank for the proper form: it normally costs nothing to make this designation (the bank may refer to the pay-on-death designation as a Totten Trust). ♦​Brokerage and mutual fund accounts can, in most states, have a “transfer on death” designation that has a similar effect (at this writing, only Louisiana and Texas fail to allow it). Though many brokers charge a nominal fee to add this designation, some will waive the fee if you ask—so ask. ♦​In states that recognize them (28 at last count in 2021), Transfer On Death Deeds (TOD Deeds) allow real estate to transfer directly to your heirs at death.

(See specific suggestions in the “Selected Mutual Funds” appendix.) If you do, you will outperform at least 90% of all your friends and neighbors—including many who work much harder at this than you.

The highest-risk investments include: Futures Commodities Limited partnerships Collectibles Rental real estate Penny stocks (stocks that cost less than $5 per share) Speculative stocks (such as stock in new companies) Foreign stocks from volatile nations “Junk” (or high-yield corporate) bonds Moderate-risk investments include: Growth stocks (companies that reinvest most of their profits to grow the business) Corporate bonds with lower (but still investment-grade) ratings Mutual funds or exchange-traded funds (ETFs) Real estate investment trusts (REITs) Blue chip stocks Limited-risk investments include: Top-rated investment-grade corporate and municipal bonds The lowest-risk investments include: Treasury bills and bonds FDIC-insured bank CDs (certificates of deposit) Money market funds Practicing

Let’s assume a child is born today. For the next 65 years, she or her parents will deposit a certain amount into a stock mutual fund that pays an average annual return of 10 percent. How much do you think they need to deposit each day in order for her to have $1 million at age 65? Five dollars? Ten Dollars? In fact, a daily deposit of only 54 cents compounds to more than $1 million in 65 years. It really helps to start early.

_____________ ___________________, hereby state that I am an investor who is seeking to accumulate wealth for many years into the future. I know that there will be many times when I will be tempted to invest in stocks or bonds because they have gone (or “are going”) up in price, and other times when I will be tempted to sell my investments because they have gone (or “are going”) down. I hereby declare my refusal to let a herd of strangers make my financial decisions for me. I further make a solemn commitment never to invest because the stock market has gone up, and never to sell because it has gone down. Instead, I will invest $______.00 per month, every month, through an automatic investment plan or “dollar-cost averaging program,” into the following mutual fund(s) or diversified portfolio(s): _________________________________, _________________________________, _________________________________. I will also invest additional amounts whenever I can afford to spare the cash (and can afford to lose it in the short run). I hereby declare that I will hold each of these investments continually through at least the following date (which must be a minimum of 10 years after the date of this contact): _________________ _____, 20__. The only exceptions allowed under the terms of this contract are a sudden, pressing need for cash, like a health-care emergency or the loss of my job, or a planned expenditure like a housing down payment or a tuition bill. I am, by signing below, stating my intention not only to abide by the terms of this contract, but to re-read this document whenever I am tempted to sell any of my investments. This contract is valid only when signed by at least one witness, and must be kept in a safe place that is easily accessible for future reference.

Instead, recognize that investing intelligently is about controlling the controllable. You can’t control whether the stocks or funds you buy will outper-forms the market today, next week, this month, or this year; in the short run, your returns will always be hostage to Mr. Market and his whims. But you can control: your brokerage costs, by trading rarely, patiently, and cheaply your ownership costs, by refusing to buy mutual funds with excessive annual expenses your expectations, by using realism, not fantasy, to forecast your returns7 your risk, by deciding how much of your total assets to put at hazard in the stock market, by diversifying, and by rebalancing your tax bills, by holding stocks for at least one year and, whenever possible, for at least five years, to lower your capital-gains liability and, most of all, your own behavior.

Another time, you might pull your child close—don’t delay, because most smokers start between the ages of eight and 14—and say, “See that nice young man over there with his collar up in the wind, smoking outside that building? They won’t let him smoke inside, because a lot of people don’t like smoke, and his family is probably worried that he might get sick someday—but forget all that. Here’s his real problem. Those cigarettes he’s become addicted to cost him $6 a day. By now, he’d probably like to quit smoking, but it’s very, very hard to quit once you start. So he gives the tobacco companies $6 a day and probably will for the rest of his life. But if he hadn’t gotten hooked, or could somehow quit, and put that $6 a day into a mutual fund at 7% instead, he’d have an extra $2 million by the time he’s Grandpa’s age.

In the movie Dumb and Dumber, Jim Carrey’s character, Lloyd, asks the love of his life what his chances are of making her love him, too. “Not good,” replies Mary Swanson. “Not good like one out of a hundred?” asks Lloyd haltingly. Mary answers, “I’d say more like one out of a million.” Exclaims Lloyd: “So you’re telling me there’s a chance? Yeah!” It’s no different when you buy a stock or a mutual fund: Your expectation of scoring a big gain will typically elbow aside your ability to evaluate how likely you are to earn it. That means your brain will tend to get you into trouble whenever you’re confronted with an opportunity to buy an investment with a hot—but probably unsustainable—return.

According to Roger Ibbotson, who has spent a lifetime measuring returns from alternative portfolios, more than 90 percent of an investor’s total return is determined by the asset categories that are selected and their overall proportional representation. Less than 10 percent of investment success is determined by the specific stocks or mutual funds that an individual chooses.

Initially, he was entranced by the professional investing industry that was blossoming as he entered adulthood. At the time of writing the Financial Analysts Journal article, Bogle was a young hotshot executive of Wellington, one of the oldest and largest mutual fund managers in America. But an odd combination of disaster and serendipity in the mid-1970s set him on the path to upending the industry he once venerated. “There’s nobody more religious than a convert,” observes Jim Riepe, one of Bogle’s closest colleagues in the founding of Vanguard, as a way of explaining the remarkable metamorphosis.

Can one unearth above-average fund managers, who can consistently or over time beat the market? Once again, the academic research is gloomy for the investment industry. Using the database first started by Jim Lorie’s Center for Research in Security Prices, S&P Dow Jones Indices publishes a semiannual “persistence scorecard” on how often top-performing fund managers keep excelling. The results are grim reading, with less than 3 percent of top-performing equity funds remaining in the top after five years. In fact, being a top performer is more likely to presage a slump than a sustained run.18 As a result, as Fernando’s defenestration highlighted, the hurdle to retain the faith of investors keeps getting higher, even for fund managers who do well.* In the 1990s, the top six deciles of US equities-focused mutual funds enjoyed investor inflows, according to Morgan Stanley.19 In the first decade of the new millennium, only the top three deciles did so, and in the 2010–20 period, only the top 10 percent of funds have managed to avoid outflows, and gathered assets at a far slower pace than they would have in the past.

TWO AND A HALF CENTURIES AGO, Amsterdam was the world’s commercial center, but many of its wealthy merchants were reeling from one of the world’s first financial crises. The shares of the British East India Company had collapsed, culminating in a series of bank failures, government bailouts, and ultimately nationalization, a debacle that rippled across the continent’s nascent markets. For a little-known Dutch merchant and stockbroker, it proved the inspiration for an idea ahead of its time. In 1774, Abraham von Ketwich set up a novel, pooled investment trust he called Eendragt Maakt Magt—Dutch for “Unity Creates Strength.” This would sell two thousand shares for five hundred guilders each to individual investors, and invest the proceeds into a diversified portfolio of fifty bonds. These were divided into ten different categories, from plantation loans, bonds backed by Spanish or Danish toll road payments, to an assortment of European government bonds. At the time, bonds were physical certificates written on paper or even goatskin, and these were stored in a solid iron chest with three locks, which could be opened only by Eendragt Maakt Magt’s board and an independent notary. The aim was to pay a 4 percent annual dividend, and disburse the final proceeds only after twenty-five years, hoping that the diversity of the portfolio would protect investors.1 As it turns out, a subsequent Anglo-Dutch war in 1780 and Napoleon’s occupation of Holland in 1795 wreaked havoc on Eendragt Maakt Magt. The annual payments never materialized, and investors didn’t receive their money back until 1824, albeit then receiving 561 guilders a share. Nonetheless, Eendragt Maakt Magt was a brilliant invention that would go on to inspire the birth of investment trusts in Great Britain and eventually the mutual fund we know today. It is also arguably the ultimate intellectual forefather of today’s index funds, given its minimal trading, diversified approach, and low fees, charging a mere 0.2 percent a year.

Another problem is the number of options available for investment allocation in pension plans. Even grocery shoppers can get overwhelmed by the number of choices available. For example, a store display of 6 flavors of jam results in more purchases than a display of 24 flavors of jam. Employees can also get overwhelmed when they have hundreds of investment choices in their pension plan. An overwhelmed employee delays making decisions so long that he or she never ends up participating in the plan. One study shows that the probability of participation by an employee falls by 1.5–2 percent for every ten mutual funds added to the menu. Having fewer funds to choose from leads to higher participation.16

A high school dropout, Robert Vesco bilked and conned his way to riches. Two times Forbes magazine named Vesco as one of the 400 richest Americans. The articles simply stated that he was a thief. As a man continually on the run, he was constantly attempting to buy his way out of the many complicated predicaments he got himself into. In 1970, Vesco made a successful bid to take over Investors Overseas Services (IOS), an offshore, Geneva-based mutual fund investment firm, worth $1.5 Billion. Employing 25,000 people and selling mutual funds throughout Europe, primarily in Germany, he thought of the company as his own private slush fund. Using the investors’ money as his own, he escalated his investment firm into a grand “Ponzi Scheme.” During this time he also made an undisclosed $200,000 contribution to Maurice Stans, Finance Chairman for President Nixon’s Committee to Re-elect the President, known as CREEP. To make matters worse, the media discovered that his contribution was being used to help finance the infamous Watergate burglary.

It's not just about ideas it's about making ideas happen DO IT!

When Adam Smith described the concept of the “invisible hand,” he concluded that the individual businessman “generally neither intends to promote public interest, nor knows how much he is promoting it.” Hence, Smith argued that “it is not from the benevolence of the butcher, the baker, or the brewer that we expect our dinner, but from their regard to their own interest . . . their self-love.” So it is in the traditional mutual fund industry. We cannot expect management companies to operate in the public interest. We must recognize the reality that they are in the business of investing other people’s money in order to maximize their own profits, even though those profits come at the expense of their fund shareholders.

Questions to ask when analyzing a business Business - How does the company make money? - Does it seem like it should be a good business? Is it competitive? Do suppliers have too much power? Do customers value the product? Are there substitutes? - Without looking at financials, how does the company seem like it has done against competitors in its industry in terms of executing on its vision? - What reputation does the management team have? Do they seem honest? Straightforward? Valuation - What is the company's P/E multiple? Is it high or low for its industry? For the overall market right now? Why might the stock be trading at this valuation? - What is the company's free-cash flow yield? Is this a relevant metric given the stage the company is in? How does it compare to similar companies? - Is the company growing faster or more slowly than other companies with similar multiples? - Based on the number alone, does the company seem to have a rich valuation or a cheap valuation? Why might this be the case? Financials - What has been the trajectory of revenue growth over the past ten years? Why? What is it expected to do in the future? - How has the company's industry been growing? Is the company gaining or losing share in its industry? - What is the company’s level of profit margins? How does it compare to other companies in its industry? - How have margins varied over the past ten years? Why? - What percentage  of the company's costs are fixed costs versus variable costs? - What is the company's historical return on capital? Why is it high/low? What does this say about the quality of the business? - What is the trend in returns on capital? Why? What does this say about the returns the company will have to make on its future investments? - What is the company's dividend policy? Why? If they are paying no dividend or a small dividend, is there a danger that the company's management will waste shareholder's money? Technical - How have the company's shares performed against the overall market and its industry over the past twelve months? - What seems to be driving this under/over performance? - What key news events are likely to impact the stock in the future? - Do mutual funds and other large institutional investors seem to be buying or selling the shares? Sentiment and Expectations - What are the consensus earnings estimates for the next quarter and year? Do they seem aggressive or conservative? - Does consensus opinion seem overly bullish or bearish about the company's future prospects? - What insight do you have that the market might be missing that will cause the shares to appreciate?

Compared to females from a same-sex twin, the study concludes that female twins from an opposite-sex pair: allocates more of her financial assets to equity; invests in a higher-risk portfolio, as measured by return volatility; and allots a higher proportion to individual stocks relative to mutual funds.

Today, you have the option to invest through a discount brokerage account, a mutual fund account, a full-service brokerage account, or even a bank account.

Discount brokerage accounts are low-cost online accounts offered by firms like E*TRADE, Charles Schwab, and Fidelity. These accounts allow do-it-yourself investors to purchase a large variety of common stocks, mutual funds, and exchange-traded funds (ETFs),

Nowadays, most banks offer stock trading services and it would be a good idea to start your enquiries with your bank.

In return for the service and to cover the annual cost for fund management and other expenses, the mutual fund levies fund management charges (FMC). The FMC levied varies across schemes from around 0.75% to 2.50% (the

Let us assume a wealthy person who wants to apply for Rs 50 lakhs worth of shares. He is not eligible to apply with retail investor’s tag and would come under non institutional investor category. Quota for this category is mere 15 percent translating to Rs150 crores worth of shares. Rest would go to foreign institutional investors, mutual funds and qualified institutional investors.

Anyways, whenever you are going to buy shares or units of a mutual fund anytime in the future take the stand of a middle class father buying jewels for his daughter’s wedding. Never ever align your investment selection habit with a ultra-fancy rich girl’s cosmetic purchasing habit.

Mutual fund Investments have Capital Protection Plans, Fixed Maturity Plans (FMP) or Liquid or Money market schemes that invest

Mutual Fund Investments are not transparent: In India, SEBI regulates MFs. The money market MFs are regulated by RBI. There are restrictions as to the sponsor, board of trustees, asset management company, custodian, registrar, dealing with brokers, etc. The investment objective, fund manager, entry and exit loads, AUM, expense ratio and other terms and conditions are already known and provided in the SAI. Also, every MF scheme is required to publish a fact sheet on a quarterly/monthly basis that includes all the important facts that an investor would need to know about the scheme including portfolio holdings, past returns, performance ratios and dividends. Also, information relating to what’s in (bought) and what’s out (sold) by mutual funds is also available.

Low cost: Investment in a direct plan of a big diversified equity mutual fund would cost only 1.30% per year (expense ratio of about 1.9% and saving by direct option of about 0.6%)