The Bogleheads' Guide to Investing by Taylor Larimore, Mel Lindauer, Michael LeBoeuf

(New York: John Wiley & Sons, 2006-04-20), 335

Notes


Contents


Foreword

Part I: Essentials of Successful Investing

Chapter 1: Choose a Sound Financial Lifestyle

  • Before investing:
    • Graduate from a paycheck mentality to a net worth mentality
    • Pay off credit card or other high-interest debt
    • Establish an emergency fund

Chapter 2: Start Early and Invest Regularly

  • Saving is the key to wealth: pay yourself first
    • commit future pay increases to investing
    • buy used (esp. cars)
    • live somewhere cheaper
    • create a side income
  • The power of compounding

Chapter 3: Know What You're Buying: Stocks and Bonds

  • Lots of details on different types of bonds

Chapter 4: Know What You're Buying: Mutual Funds, ETFs

  • Info about these asset types...

Chapter 5: Preserve Your Buying Power with Inflation-Protected Bonds

  • TIPS (Treasury Inflation-Protected Securities)

Chapter 6: How Much Do You Need to Save?

  • Estimate what you need to save based on retirement age, years in retirement, asset returns, inflation, inheritance, etc.

Chapter 7: Keep It Simple

  • Make low-cost index funds the core, or all, of your portfolio

Chapter 8: Asset Allocation

  • The most fundamental decision (after starting to save) is asset allocation
  • Example asset allocations on 104+, for example:
    • Young Investor: 80% Vanguard total Stock ETF, 20% Vanguard total Bond ETF
    • Middle-Aged Investor: 45% total stock, 10% total int'l, 5% REIT, 20% total bond, 20% TIPS
    • Late retirement: 20% total stock, 40% total bond, 40% TIPS

Chapter 9: Costs Matter

  • Read the prospectus and choose low-fee funds

Chapter 10: Taxes: Part One

  • Reduce Mutual Fund taxes by choosing funds with low dividends/"qualified" dividends or buying after distribution date, and low turnover

Chapter 11: Taxes: Part Two

  • Discussion of 401(k) plans, 403(b) plans, IRAs, Roth IRAs,

Chapter 12: Diversification

  • Don't put all your eggs in one basket

Chapter 13: Performance Chasing and Market Timing Are Hazardous to Your Wealth

  • Past performance does not predict future performance
  • Make a plan, and stay the course

Chapter 14: Savvy Ways to Invest for College

  • Discusses options including: personal savings in parent's names, custodial accounts, U.S. Savings Bonds, Coverdell Education Savings Account (ESA), 529 Plans, IRA withdrawals

Chapter 15: How to Manage a Windfall Successfully

  • Deposit and leave the money for 6 months
  • Know what you can buy (it's less than you think after taxes, etc.)
  • Get professional help

Chapter 16: Do You Need an Advisor

  • Watch out for advisors, and if you use one ensure they are actually fee-based

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

Chapter 17: Track Your Progress and Rebalance When Necessary

  • Select your asset allocation, and then rebalance to maintain that on a regular cadence

Chapter 18: Tune Out the "Noise"

  • Avoid the distractions of financial media that might steer you away from your plan
  • Research by reading good books and information online

Chapter 19: Mastering Your Investments Means Mastering Your Emotions

  • Behavioral economics: build process to overcome your natural greed and fear
  • Recency bias. Never assume today's results predict tomorrow's. It's a changing world.
  • Overconfidence. No one can consistently predict short-term movements in the market. This means you and/or the person investing your money.
  • Loss aversion. Be a risk manager instead of a risk avoider. Believing you are avoiding risk can be a costly illusion.
  • Paralysis by analysis. Every day you don't invest is a day less you'll have the power of compounding working for you. Put together an intelligent investment plan and get started. If you need help, seek out a good financial planner to assist you.
  • The endowment effect. Just because you own it, or are a part of it, doesn't automatically mean it's worth more. Get an objective evaluation. Invest no more than 10 percent of your portfolio in your employer's stock.
  • Mental accounting. Remember that all money spends the same, regardless of where it comes from. Money already spent is a sunk cost and should play no part in making future decisions.
  • Anchoring. Holding out until you get your price to sell an investment is playing a fool's game. So is blindly assuming that your financial person is doing a great job without getting an objective reading of what's really going on. Get a second opinion.
  • Financial negligence. Take the time to learn the basics of sound invest-ing. It's really pretty simple stuff. Knowing it can make the difference between having a life of poverty or one of prosperity.

Chapter 20: Making Your Money Last Longer Than You Do

  • You can't predict how much money you will need in retirement
  • Extend your runway by keeping fixed living expenses as low as possible, and earn supplemental income as needed

Chapter 21: Protect Your Assets by Being Well-Insured

  • Consider insurance for: life, health, disability, property, auto, liability, long-term care
  • Only insure against bit catastrophes you can't pay for out of pocket (the cheapest insurance is self-insurance)
  • Carry the largest deductibles you can afford
  • Only buy coverage from high-rated insurance companies

Chapter 22: Passing It One When You Pass On

  • Have a will, living trust, power of attorney, advance health care directive

Chapter 23: You Can Do It

  • Choose and live a sound financial lifestyle
  • Start to save early and invest regularly
  • Know the basics of stocks, bonds, ETFs. Don't invest in things you don't understand
  • Estimate how much you will need for retirement to keep yourself on track
  • Invest in low-cost index funds
  • Build an asset allocation plan
  • Costs matter (fees and taxes)
  • Rebalance regularly
  • Don't try to time or beat the market
  • Invest for your children's education
  • Tune out the news

Topic: Investing

Source

Created: 2024-04-29-Mon
Updated: 2024-08-23-Fri