On the last episode of Veggie Tales, we discussed the importance of tracking. Now that we know where we are and we are taking steps to save more of what we are making, where do we go from here?
Let’s take a moment to acknowledge the greatness of a man by the name of Jack Bogle. Warren Buffett is quoted to have said, “Jack did more for American investors as a whole than any individual I’ve known. A lot of Wall Street is devoted to charging a lot for nothing. He instead charged nothing for a lot.”
Jack Bogle is famously known as the founding father of the index fund. He famously started the investment firm Vanguard which was the first of its kind to be owned entirely by its investors rather than a management firm on Wall Street charging high fees.
To borrow from the wisdom of this man, I will read a passage from his introduction to “The Little Book of Common Sense Investing.” He writes, “Successful investing is ALL about common sense. As the Oracle has said, it is simple, but it is not easy. Simple arithmetic suggests, and history confirms, that the winning strategy is to own all of the nation’s publicly held businesses at very low cost. By doing so you are guaranteed to capture almost the entire return that they generate in the form of dividends and earnings growth. The best way to implement this strategy is indeed simple: Buying a fund that holds this market portfolio, and holding it forever. Such a fund is called an index fund.”
“Please think for a moment, about the relentless rules of humble arithmetic. These iron rules define the game. As investors, all of us as a group earn the stock market’s return. As a group – we are average. In other words, each extra return that one of us earns means that another of our fellow investors suffers a return shortfall of precisely the same dimension. Before the deduction of the costs of investing, beating the stock market is a zero-sum game.”
So why do we waste our time trying to outsmart the market as a whole? Perhaps out of ego, or pride thinking we are the exception rather than the rule.
But as Andrew Tobias writes, “aiming for higher returns is a good way to get lower returns…Unless you want to switch from being a watever you were being to being a financier; unless you enjoy worrying about money and taking risks and paying taxes on profits and stewing over your losses; unless you are intrigued by the machinations of the Fed’s Open Market Committee and the effects on the financial markets of the latest fiduciary fad – you should simply structure your assets, should you be so fortunate as to have them in such abundance, so as to give you security and peace of mind.
Life is not a business, as my father used to say. Why not set yourself up comfortably and stop worrying?”
