In this month’s issue of MONEY magazine they have an article titled “The Best Advice of All Time.” In it they look at 20 rules for success from some of the wisest people who have lived. I have pulled out a few of my favorites:
Many receive advice, few profit by it.
-Publilius Syrus, 42 B.C.
I have noticed this to be true more times than I can count. It is difficult looking back and realizing that things could be much different now, had you heeded some wise advice then. I think there is no more of an appropriate example than saving for retirement. How many of us received good advice when we were younger, but failed to realize how valuable the advice was until years or decades later?
For age and want, save while you may; no morning sun lasts a whole day.
-Benjamin Franklin
Even back in Ben Franklin’s day having a emergency fund was a good idea.
The best way to own common stocks is through an index fund.
-Warren Buffett
Many advisors will dispute this advice saying that you are better off with a professionally managed mutual fund. What is interesting is that the vast majority of mutual fund managers fail to beat the index. Yes, that is correct, they get paid hundreds of thousands of dollars even when most of them fail to beat the index.
You do not hear Warren’s advice too often, because most of the people who are giving the advice are getting paid by the mutual fund companies.
Bottom line: Index funds are generally a safer alternative than mutual funds and are a great starting point for a beginning investor.
Performance comes and goes, but costs roll on forever.
-Jack Bogle
Another argument for the case of index funds is the costs associated with them. Many mutual funds will charge 1% or higher per year in expenses, and many index funds are lower than 0.3%. This may not seem like a big difference, but over the course of decades it adds up to huge amounts of cash.
For instance, lets say you invested $100,000 for 30 years and got a 8% return on your money. If you invested it in a fund that charged 1.5% per year in expenses you would end up with $639,440. Now if you had invested it in a fund that charged 0.2% you would have earned $947,608 in the same time period. That is a difference of $308,168!!
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Great post. I especially like your comment about index fund and expenses.
Thanks Pinyo, I know that you can get better performance than index funds (occasionally), but for a beginner, I really suggest them – they are just so cheap and easy!
There is not many index fund available in my country, Malaysia. The charges is 2-3% for index fund which only follows the main Composite Index in Bursa Malaysia.
However, there are many equity funds that beats the index easily in my country, probably due to the lack of investment knowledge from the public.
I think that Index Funds are the way to go. Trying to pick stocks can take up a huge amount of time. You can also pay someone else to pick stocks for you, but there is no guarantee that they will even beat the Index Fund.
Great advice on index funds, especially when you see the % !
I’ve been fired and I was forced to take a disability designation. I’ve called all of the governmental agencies and “nonprofit” agencies and there is no help. My life savings is depleted. I’ve placed ads on all of the job lists for a HOME BASED job or business. The only thing that I’ve received from that is telephone sales or marketing (I have aphasia) or scams. I’ve even placed ads on the “begging” sites. I’m desperately seeking some income. Do you have any suggestions at all?
Kathy, I will send you an email about this…