Dividends and 5 pieces of sage advice courtesy of John Bogle

In mid January, John bogle the founder of Vanguard Group Inc passed away, his company had $4.9 trillion under management. He is truly one of the people who changed how people invest their money for the better. In an article by Amie Tsang of The New York Times News Service are 5 investment tips:

  1. Stay the Course

The nature of index funds, particularly when the funds rebalance themselves by eliminating losing companies, means over the long term index funds do well. An index fund can lower risk and with the number that now exist offer diversification.

2. Beware of the Experts

In Investing, everyone knows what has happened, no one knows what will happen. We think we have a reasonable idea but it can be wrong. Most people and experts called for the same action at the top of the market as when it slides.

3. Keep Costs Down

Costs matter, if you own a typical mutual fund and the fee was 2 – 3%, it is great if the fund has double digit returns but what if the returns are 4%. Then after fees you have only made 1-2% or less? were you further ahead? Indexing allows fees to be less than 1% and close to 1/4%. You will make more money with those fees.

4. Do not get too Emotional

If you invest in solid companies and know why they make money, you do not have to change the portfolio, just worry about reinvesting money.

5. Own the Entire Stock Market

If the big funds use the entire market as a bell weather to measure how the funds are doing, does it not make sense to own the S&P 500 yourself?

Linking to dividend paying stocks, invariably one of the most important lessons in investing is try not to lose money. We know over the long term, the stock market tends to go up because the companies in the index are changed – the losers are replaced by winning companies. Ideally keeping fees to a minimum is something you should do, it increases your returns and gives you more choices.

There are more questions than answers, till the next time – to raising questions.

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