As I start to shift my financial focus from debt repayment towards saving and investing, I find myself doing a lot more research about stocks and mutual funds – after all, there’s not a lot of research involved in saving 🙂 Based on what I’ve been reading recently, I’m becoming convinced that investing in individual stocks isn’t right for me. Frankly, I just don’t think I have the chops to be researching stocks and tracking the market frequently enough to make prudent choices. I’m not saying this to be self-deprecating, I’m just not interested enough in the whole process of investing in individual stocks to put in the necessary time and energy to turn a decent profit.
Apparently, there are a lot of people out there like me, people who want the benefits of investing in stocks, who want diversification, but who can’t be bothered to do the research themselves and who definitely can’t afford to hire a financial planner to do the research, either. Enter low-cost index funds and ETFs that are invested in many stocks which span many sectors, including energy, pharmaceuticals, retail, etc. In other words, these funds are a one-stop shop, so they offer the all-important simplicity, along with solid returns and broad diversification.
So anyway, I think that this strategy is probably the best approach for me – investing in low-cost index funds that offer broad equity exposure. But it looks like I’m not alone, and that this isn’t a novel idea (darn it!). In fact, this investing M.O. is fairly common, thanks in part to the Bogleheads.
Who are the Bogleheads you ask? The Bogleheads are group of investors who are diehard followers of John Bogle, the founder of the Vanguard investment firm, who believes in offering consumers an easy-to-understand, low-cost, high-return path to wealth. Bogle doesn’t believe in trying to “beat the market” and is therefore highly skeptical of actively-managed mutual funds and complex investment schemes. The Bogleheads, who whole-heartedly agree with this approach to investing, are spreading the Bogle gospel. They host an online forum, have written a number of books on investing and personal finance, and generally espouse the principles of investing early, avoiding individual stocks, and keeping it simple.
I strongly encourage you to click on the links here to learn more about the Bogleheads, particularly if, like me, the idea of investing kind of freaks you out. The Bogleheads’ advice is solid and they present their ideas in a simple yet non-condescending or infantilizing way (I hate those stupid “for dummies” books).
So am I a Boglehead? I think I might be! What about you?
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