I came across the book “The bogleheads guide to investing” in the public library recently. I took it since the name Bogle sounded familiar and I had only 15 mins to choose a book before the library closes down for the day. I assumed it was written by John Bogle but it was not be so. It had three authors – all leaders of an online forum called bogleheads who are basically diehard fans of John C Bogle’s investment philosophy. I was sceptical but the book was quite ok. The opinions and advice of the authors had lots of common sense and some of them had really caught my attention and I really want to put them in practice even though my ego is still actually reluctant to follow them.
One of the points was to invest a bulk or all of your money in index funds – equity and/or bond. I am also a DIY investor who started a year ago, right at the peak of the Indian Bull Run. And I don’t have to say that I am not doing too well with my portfolio. It’s obvious isn’t it? But I don’t know if that’s attributable to the financial crisis that swamped the global markets since I started or it’s my poor stock selection. Anyhow!! Coming back to the topic of Index funds I know for sure that investing in these funds are the easiest and the most efficient, and perhaps most assured, way to long term wealth. It does not need much of your time – you don’t have to spend hours going through company’s financials, prospects for the sector, profiling the quality of the management etc. Basically you don’t have to do anything except for choosing an index fund with good track record and low expense. That’s it!! It’s as simple as that.
But the problem lies in this simplicity. Is it not too boring? Where is the challenge, where is the uncertainty, where is the thrill? Don’t we want to beat the market and those highly paid and fancied fund managers? Yes, we certainly want to do that and we can do that – that’s what our ego tells us. But if you really let your commonsense rule then you know for sure this is the way to go forward. So, reluctantly, I am going to look for an index fund that gave decent returns over 5 year period and has a low expense ratio and put in 50% or more of my money. Rest I will manage actively to feed my ego. I may do well or may not, I don’t know yet but what I know for sure is that the 50 odd % of my money in the index funds will do its job of compounding my wealth at decent percentage every year.
So, now let me focus on choosing an index fund!!