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Michael Bodman
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Michael D. Bodman I manage finance operations at a marketing and public relations agency. The views expressed here are my own. I do independent economic research and digital publishing through the company I founded: Portfolio Economics. I believe in portfolio theory, value investing, and... More
My company:
Portfolio Economics LLC
My blog:
Portfolio Economics
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    "If you have trouble imagining a 20% loss in the stock market, you shouldn't be in stocks." - John Bogle, Founder of the Vanguard Group

    Apr 08 4:37 PM | Link | Comment!
  • Why Index Funds Are The Best Strategy

    Instead of trying to beat the market, index funds attempt to be the market. Index funds track household names, such as the Dow Jones Industrial Index and the S&P 500 Index. Creating and operating a passively managed index fund is far less expensive than a traditional, actively managed fund run by a highly compensated fund manager. Index funds don't have active fund managers.

    The index fund movement

    Vanguard pioneered the index fund movement, starting in the 1970s. Today, Vanguard is one of the largest investment companies in the world with approximately $3 trillion in assets. The average Vanguard index fund costs 0.18% a year in expenses, compared to the industry average of 1.02%, according to Vanguard and Lipper. That's 82% lower than the industry average. Every penny you pay in expenses comes directly out of your investment account and into your fund company's account.

    Index funds have not only a cost advantage but also a performance edge. Few actively managed funds consistently beat the indexes they use as performance benchmarks. In a recent article based on a study by S&P, it was reported that none of the 2,862 actively managed funds studied over a six-year period were on track to outperform the market, after expenses, according to The New York Times.

    The amount of skill needed to outperform the market, after expenses, is so great that few, if any, fund managers can do it on a consistent basis. One of the exceptions is Warren Buffett of Berkshire Hathaway (NYSE:BRK.B).


    Most investors are better off trying to be the market instead of beat the market. Your odds of success are improved by assembling a portfolio of low-cost index funds that are appropriate to your situation and objectives. If you'd like to add an actively managed component to your portfolio, consider adding shares of Berkshire Hathaway.

    Disclosure: This post was originally published by Portfolio Economics.

    Mar 20 1:39 PM | Link | Comment!
  • Quote ... Unquote

    " ...there's no reason to expect reward for just bearing risk. Otherwise, you'd make a lot of money in Las Vegas. If there's a reward, it's got to be special."

    - Professor William Sharpe, Stanford University

    Disclosure: This post was originally published by Portfolio Economics.

    Tags: Macro
    Jan 19 12:05 PM | Link | 1 Comment
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