Does it feel like you’re constantly bombarded by ads trying to sell you the next great stock? Or how about the CNBC hosts ranting about their “best guess” where the price of IBM will go tomorrow? If you’re like me, I can’t stand the constant bantering of those talk shows. Even worse is Jim Cramer. If you want to see AD on steroids, watch his show, you’re sure to get a headache. All of these so-called “experts” have sold Americans the lie that says that anyone can be successful at stock picking and timing the market. As sad as it is, most Americans buy into this philosophy. I’m not saying that everyone will lose if they try their hand at stock picking. If you happen to have a lot of time on your hands, your chances are higher. But for people who work full time, active investing is not a wise choice.
In comes the Boglehead investing strategy! The Boglehead mentality throws everything you learned from the media out the door. Let’s go over a little background first. Bogleheads is a term coined by investors in honor of John Bogle, the revolutionary behind the Vanguard Group and the rejection of stock picking and mutual funds. I could go into depth on this investing philosophy, but I’ll keep it short and sweet.
As a Boglehead, I look at my investments from a holistic approach and reject the notion that I can beat the market by picking my own stocks. Instead, I diversify my money across multiple asset classes through index funds and ETFs. Assets classes include US stocks, international stocks, bonds, and market sector specific funds. Allocation percentages is easy to calculate. I like to use a rule of thumb of your age for bond percentage. Take me as an example. I’m 23 years old, so I have roughly 20% of my assets in bonds currently. As I get older, this percentage will increase. The reason for this is to shield my money as I get older. Placing all your eggs in one basket is a risky way to invest. I hold money in US stocks, international stocks, emerging markets, and of course bonds.
Another beauty of being a Boglehead, is a stress free financial life. My investments are broad and diversified, therefore simple to track. I only invest in a couple index funds, so I never need to worry about tracking the ups and downs of the market. To be honest, I rarely check the stock market! Since I invest a portion of my income every week, my money is dollar cost averaged over the highs and lows. I don’t believe in the buy and sell philosophy. I believe you should ALWAYS be buying no matter where the market is headed, BUY BUY BUY.
I’m so glad I learned this investing philosophy at a young age. Thinking long-term is a winning strategy and performance chasing is a losing strategy. Diversify your money, avoid high costs, and ignore the market swings.
In conclusion, I’ll leave you with some wisdom from the mouth of John Bogle himself, “stay the course!”
Comment below if you’re a fellow Boglehead or just totally disagree with this investing strategy!