These are the ten rules of common sense investing for beginners. Learn how to tell a good mutual fund from a bad one. What is an index fund? And why do they outperform in the long run?
Free must-read guide: Smart Investing For Beginners
Free must-read guide: Build an All-Weather Portfolio
Free course: Common Sense Investing
Free course: Where Should I Put Money
Free course: 9-Steps To Financial Independence
Free resources: Learn How To Invest
Recommendations: Best Books On Investing
Learn more from books I recommend at my Amazon Influencer page:
▼The Ten Rules of Common Sense Investing is a series to teach investing for beginners:
✅ Rule #1: Develop a workable plan
✅ Rule #2: Start saving money early
✅ Rule #3: Control stock market risk exposure
✅ Rule #4: Diversify stocks
✅ Rule #5: Never try to time the market
✅ Rule #6: Use index funds when possible
✅ Rule #7: Keep costs low
✅ Rule #8: Minimize taxes
✅ Rule #9: Keep it simple
✅ Rule #10: Stay the course
These are also endearingly called the Boglehead Investment Philosophy. I call them the Ten Rules of Common Sense Investing as a nod to my favorite book by John C. Bogle.
▼Other helpful playlists:
✅ Bond Basics
✅ Why Bother With Bonds
▼Articles and Courses:
* Smart Investing for Beginners — complete guide at
* Rule#6: Use index funds and passive investing — transcript at
* Both free and small-fee courses at
thank you so much for these wonderful videos!
@conillusionist Thanks for watching! You can help spread the word. Too few people are ever taught this stuff. Tell your friends what you learned and point them to the book or videos. All the best to you! -Rick
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Absolutely! First, dollar cost averaging means investing regularly–like $100 from every paycheck–and this is the most important habit. Second, it removes the emotional component. The $100 buys more stock when the market is up, and less stock when the market is down. Congratulations to you for starting at age 25. You'll be happy you did.
Whoops, I got that backwards didn't I. More stock when the market is down…
I'm saving $40 off every check for my first index fund investment. half way there. i'm just wondering if i should use my bank. or Investment banker?
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The observation renews the tendency.
The past stretch bolsters the salt.
The place litigates the doubtful jelly.
Do you have a source for the 50 years 1% figure?
Hi Branden,
Yes I do. I post my transcript with footnotes on my website FinancingLife (dot) org, but the source you are requesting is this book: All About Index Funds, by Richard A Ferri, 2nd Edition, McGraw-Hill, 2007, p.25.
I'll also note that if you follow the discussion forum at Bogleheads (dot) org, you will see that this gets validated annually.
Thank you for your comment, I suspect many others wondered the same.
Best of luck to you and your investing,
Rick
When watching this video, it appears that the graphic is depicting the historical percentage of funds that have beaten the market.
I took a look at the reference described above, which said:
"In certain cases I will make assumptions about the future return of index funds relative to active returns without the benefit of historic numbers (Figure 2-2)" <–The graphic in discussion
The graphic also assumes a 2% per year higher cost. Is that really a fair assumption in today's market?
Making same point in a 2013 article “The Arithmetic of Investment Expenses”, Nobel Laureate William Sharpe compares two similar funds with a difference in expense ratio of 1.06%. The cumulative impact over 20 to 30 years is staggering. In the author’s words, “Under plausible conditions, a person saving for retirement who chooses low-cost investments could have a standard of living throughout retirement more than 20% higher than that of a comparable investor in high-cost investments.” Thanks.Rick
But what about my post above?
Yes, the bar chart is the probability of an active fund beating the market (or, index funds).
You also asked whether 2% higher cost was still a fair assumption. I pointed to a recent compelling study where the difference in expense ratios of only 1.06% has a staggering cumulative impact.
If you wish to substantially beat the market, please search my site for the video “Warren Buffett on Index Funds” where he tells you how to do this, and why the 99% rest of us should use low-cost index funds.
I'm on board with indexing. I just think some of the information in this video is misleading/unsubstantiated.
Thanks for your comments Branden. The videos serve as brief introductions to these basic principles. Everyone would be well served to pursue the topics further with good books, and articles. Numerous outstanding references can be found on sites such as
Bogleheads (dot) org (slash) wiki
It’s challenging to squeeze these videos down to a few minutes each.
I’m glad you are on board with indexing, and thanks for watching.
Rick
Well Done!!
Is starting at 27 starting late? I'm considering starting index funds with $5500 each year in TFSA.
lesson from bogle
1:00 WHAT??
no… that is not true, the company could have made a profit…. Thus both could be the a "winner" while the customer on the backend is the one who lost money….
All your videos are excellent. Thank you.
What kind of returns can i expect how risky is it ? I have about 3,000 dollars i want to purchase a index fund from vanguard either the S&P 500 ETF or total stock market ETF which account would be better?
thank you for all the work you do putting up these videos for free, they are so useful and clear
These guiding principles of investing for beginners are also called the Boglehead Investment Philosophy, named endearingly after John C. Bogle the champion of common sense investing.
didn'i get the full meaning of index fund vs. active aside from management style. so- is an index fund say the SP 500 ? and what is an active fund, a stock? or can both have the asset as sp 500 with only diff being management style? ty 4 vid