I don't know how to describe John's success. Did he fall on something big, because he was lazy? Did he accidently notice something unbeatable in Wealth Building, because he was ambitious? By his own account (From my memory), he read a book about Investing. That book outlined the concept of an Investment based upon the Standard and Poor's 500 Index. John realized that such an Investment Index of Equities didn't exist. He saw the potential.
We must take a step back and admire this thought. It's brilliant! It's logical for an investor to diversify. Not Sectoral Diversity alone, but leveraging investment funds throughout Businesses and Sectors. It's simple to see for people experienced, "In the game," but it could be very confusing to those on the sidelines. I'll try to paint paint a picture for anyone reading.
We must take a step back and admire this thought. It's brilliant! It's logical for an investor to diversify. Not Sectoral Diversity alone, but leveraging investment funds throughout Businesses and Sectors. It's simple to see for people experienced, "In the game," but it could be very confusing to those on the sidelines. I'll try to paint paint a picture for anyone reading.
An Investor can make an educated guess and have forward looking thoughts regarding Investment growth. Hopefully their guess is derived from News, Statements outlining Momentum, DEBT, and reviewing Balance Sheets.
Now, an Investor could be, for example, favoring the most balanced Wireless Telecom. The best run business has the ball in hand, darting towards the End Zone! They are likely the most profitable, by a slight margin. Oh, but if that investor overlooked something!!! If that Investor got it wrong!!! It could go badly! He or she could LOSE MONEY!!!
An alternative, and potential safeguard, is to broaden the Investment allotment to include the entire Wireless Telecom Sector! Thereby, the Investor could divide their Investment Funds amongst Sprint, T-Mobile, Verizon, and AT&T. That sounds more logical right? After all, your Equity is still backed by Wireless Communication assets and those assets aren't going to disappear!
It's a theory, a derivative of the Gold Standard backing concept, it's diversity. What's backing your Equity is assets! Surely the entire Sector will grow and our Government doesn't allow a Monopoly. As a matter of fact, they'll break-up the dominant Company, if that happens.
The previous investor would gain the most, if that investor picked the better company. In contrast, if that Investor was wrong the later Investor would benefit more because they grabbed a little of the entire Sector. Sounds logical, right? The entire Sector is bound to grow. This is regarded by many as Hedging your investment. It's simple Risk Aversion.
Now, an Investor could be, for example, favoring the most balanced Wireless Telecom. The best run business has the ball in hand, darting towards the End Zone! They are likely the most profitable, by a slight margin. Oh, but if that investor overlooked something!!! If that Investor got it wrong!!! It could go badly! He or she could LOSE MONEY!!!
An alternative, and potential safeguard, is to broaden the Investment allotment to include the entire Wireless Telecom Sector! Thereby, the Investor could divide their Investment Funds amongst Sprint, T-Mobile, Verizon, and AT&T. That sounds more logical right? After all, your Equity is still backed by Wireless Communication assets and those assets aren't going to disappear!
It's a theory, a derivative of the Gold Standard backing concept, it's diversity. What's backing your Equity is assets! Surely the entire Sector will grow and our Government doesn't allow a Monopoly. As a matter of fact, they'll break-up the dominant Company, if that happens.
The previous investor would gain the most, if that investor picked the better company. In contrast, if that Investor was wrong the later Investor would benefit more because they grabbed a little of the entire Sector. Sounds logical, right? The entire Sector is bound to grow. This is regarded by many as Hedging your investment. It's simple Risk Aversion.
If Hedging is on my mind, you'll likely hear me blurb, "Nobody has a Crystal Ball"! I don't know how many times I've said that. But I wish I had a nickel for every time. It's a reminder of truth towards projection and forward momentum. It's my reminder that I don't know to bet on the Sector or the Company I'm analyzing. My Pick or others in the sector too!
In that previous example, the later reduces the odds of hitting it big but deflates the risk of loss. If you bought Sprint a few years ago, you're now in, "The house of pain"! If you bought one of the other three, well... you're pretty happy right now! Hopefully you can see this shaping up. Hopefully you can see what John envisioned.
If you bought all four Telecom's, well you did good but not the best. Surely not the worst either. But John took simple-hedging a step farther. Actually, John sprinted and then leaped over a hurdle! John laid the foundation to what many regard as the single best Investment. An S&P Index Fund.
Many professionals recommend you should first buy an S&P Index Fund, before attempting to pick Stocks. Rather than betting on a Business... Rather than betting on an entire Sector... Why not Invest, collaboratively, in the 500 Largest Companies in America?
John likely asked, "Why not collaboratively offer people the opportunity to benefit from the entire S&P 500?". Choosing Stocks is painful, timely, and difficult. Buying the S&P 500 reduces a lot of analysis. Buying the S&P doesn't require forward looking thoughts. It is simple. It's stupid. It's grossly risk-averse.
Due to the ease of deciding on which Investments and when to Buy or Sell them, John C. Bogle could charge less for Managing the Fund! This Investment was not demanding of John's time. John really don't care which Sector has the most momentum and he's not trying to make an educated guess. As a matter of fact, John thought anyone doing that was a fool (Some are wealthy fools). John really don't care which single Company will grow to the size of Amazon or Microsoft. John was essentially betting that America's top Businesses and dominant Sectors will continue to grow prosper and reward Shareholders.
Rising companies will eventually appear in the S&P. Members of the S&P, should their momentum become negative, will get removed at 501. Is this safer than a Treasury Bond? Not really. But it is not that far from it and historically more rewarding! This is where most believe your 401K and IRA should be allotted! At least the first $10K.
I've spoken to people that didn't understand what was happening with their 401K. Typically, A group of people collectively give money to a Manager. He or she then invests that money for the group. Each Manager, Fund, or ETF has their own focus.
I find Fund' introductions comical. "This fund," they may write, "Seeks to invest and safely grow funds through Oil Drilling in Emerging Markets". That should be interpreted as, "We are going to buy some risky shit with your money. The governments aren't stable and the World Bank is trying to make them prosperous. You may see massive short-term gains, but if you don't get out fast... or at the right time... YOU'LL PROBABLY LOSE... HA, HA, HA!".
Oh, and the kicker, the Fund Manager still gets his cut of your 401K allotment, if it loses value. So, most people choose from the overwhelming number of Mutual Funds and ETF's available in the hopes that it would grow. Isn't that the point of investing? I don't want to demonize Fund Managers. I'm sure many or most are religious to growing the funds and understand their fiduciary duties to the investors.
But most people don't quite, in my opinion, understand the riskier bets. I've discussed 401k selections with co-workers. They simply bit on the biggest hook. The option that provided the most gain over the past five years.
They missed the balance between Forward-Looking and Trailing gains. The Oil Reserves gotten low, ya know! A rising tide doesn't lift ships that sunk! It's a common mistake beginning Investors make. Buy the Biggest Dividend... Buy the Stock that's grown the most... Buy the Stock that's, "Oh no," a sinking ship!
In that previous example, the later reduces the odds of hitting it big but deflates the risk of loss. If you bought Sprint a few years ago, you're now in, "The house of pain"! If you bought one of the other three, well... you're pretty happy right now! Hopefully you can see this shaping up. Hopefully you can see what John envisioned.
If you bought all four Telecom's, well you did good but not the best. Surely not the worst either. But John took simple-hedging a step farther. Actually, John sprinted and then leaped over a hurdle! John laid the foundation to what many regard as the single best Investment. An S&P Index Fund.
Many professionals recommend you should first buy an S&P Index Fund, before attempting to pick Stocks. Rather than betting on a Business... Rather than betting on an entire Sector... Why not Invest, collaboratively, in the 500 Largest Companies in America?
John likely asked, "Why not collaboratively offer people the opportunity to benefit from the entire S&P 500?". Choosing Stocks is painful, timely, and difficult. Buying the S&P 500 reduces a lot of analysis. Buying the S&P doesn't require forward looking thoughts. It is simple. It's stupid. It's grossly risk-averse.
Due to the ease of deciding on which Investments and when to Buy or Sell them, John C. Bogle could charge less for Managing the Fund! This Investment was not demanding of John's time. John really don't care which Sector has the most momentum and he's not trying to make an educated guess. As a matter of fact, John thought anyone doing that was a fool (Some are wealthy fools). John really don't care which single Company will grow to the size of Amazon or Microsoft. John was essentially betting that America's top Businesses and dominant Sectors will continue to grow prosper and reward Shareholders.
Rising companies will eventually appear in the S&P. Members of the S&P, should their momentum become negative, will get removed at 501. Is this safer than a Treasury Bond? Not really. But it is not that far from it and historically more rewarding! This is where most believe your 401K and IRA should be allotted! At least the first $10K.
I've spoken to people that didn't understand what was happening with their 401K. Typically, A group of people collectively give money to a Manager. He or she then invests that money for the group. Each Manager, Fund, or ETF has their own focus.
I find Fund' introductions comical. "This fund," they may write, "Seeks to invest and safely grow funds through Oil Drilling in Emerging Markets". That should be interpreted as, "We are going to buy some risky shit with your money. The governments aren't stable and the World Bank is trying to make them prosperous. You may see massive short-term gains, but if you don't get out fast... or at the right time... YOU'LL PROBABLY LOSE... HA, HA, HA!".
Oh, and the kicker, the Fund Manager still gets his cut of your 401K allotment, if it loses value. So, most people choose from the overwhelming number of Mutual Funds and ETF's available in the hopes that it would grow. Isn't that the point of investing? I don't want to demonize Fund Managers. I'm sure many or most are religious to growing the funds and understand their fiduciary duties to the investors.
But most people don't quite, in my opinion, understand the riskier bets. I've discussed 401k selections with co-workers. They simply bit on the biggest hook. The option that provided the most gain over the past five years.
They missed the balance between Forward-Looking and Trailing gains. The Oil Reserves gotten low, ya know! A rising tide doesn't lift ships that sunk! It's a common mistake beginning Investors make. Buy the Biggest Dividend... Buy the Stock that's grown the most... Buy the Stock that's, "Oh no," a sinking ship!
The start of Vanguard is an interesting story. John sought Investors and clammered together a small group willing to take a gamble on his ambitions (Lucky for them). By his words, the money gathered fell short of his hopes and expectations.
Rather than collecting billions, Bogle collected millions. But John, the hopeful visionary, went forward with that amount and started what later became the Vanguard 500 Index Fund.
Where an S&P 500 Index Fund offers the most opportunity, for Manager's, is the simplicity I tried to outline. John didn't have to charge high fees. That's because it's not demanding of his time or an employees. Therefore, Investors get a competitive and risk averse growth rate and they aren't beat-up with fees depriving them of their gains.
When you're looking through your 401K, IRA, ETF, or Investment options, it's a good idea to start with something that indicates it is an Index Fund. There can be variants. For example, there are Utility Index Funds, Telecom Index Funds, Bond Index Funds, and Gold Index Funds. There's no shortage of highly motivated (Money Seeking) Investment Managers willing to take a gamble with your cash.
If you investigate and compare them to an S&P 500 Index Fund, over 10 years, you're likely to find they lagged in growth. They might be comparable, or better, Short-Term. But historically the S&P wins.
There was a now famous bet that came to a close. Warren Buffett waged a bet against a Fund Manager. $1M that the Fund Manager couldn't beat the S&P. One would think they could dig-in and extract a handful of investments, even from the companies in the S&P, and beat the Index. But it has proven very hard. Some actually lose, badly. Warren won the bet, against a professional Hedge Fund Manager.
So I encourage everyone, when looking for a safe, growing, risk averse option... seek something that is based upon the S&P 500 Index. If not the S&P, a large and scalable Index Fund. It should have less fees, stable growth, and outperform most other Funds or Stocks over time.
I bring this post to a close with some difficulty. I believe writing is a one way conversation, anticipating the audience (Writing as one would speak, Prose). It helps evolve ideas for both the reader and writer. A way to convey inner thoughts and the working of the mind. It has evolved human intelligence over a long time.
I've been told many times (even this morning) that I should seek employment with an Investment Bank. But the truth is, I hate giving Investment advice. And... I never completed my Degree. I invest cautiously, with my money only.
As I assume a reader may presume (That was deliberate), I don't love Money. I love the brilliance of our economic system and the empowerment, possibility, and opportunity to harvest profit for the future. That is how money should be viewed. It's not the object the should be loved. It is the system. It is putting away profit, from work, for future needs.
But our economic system has the time-value factor. Your money will lose value, if sitting idle. It needs to buy assets that can generate or later be sold for a profit. It is an employee!
Considering John recently passed away, I reflect on the Bible. In the Prophecies, specifically the Book of Jeremiah, was a Teaching. The Lord presented to Jeremiah two Baskets of Figs. He asked Jeremiah, "What do you see?". Jeremiah replied, "I see two baskets of Figs my Lord". The Lord spoke, "No Jeremiah, the one basket has firm figs, the other rotten".
That lesson is outlined as, "You can't judge a book by it's cover". I believe the Biblical lesson is much more plausible in delivering a message, "It's hard to Judge from sight alone". But Jeremiah could have asked to smell them, touch them, even taste the figs. I know I am no different than Jeremiah. You too. I see this relevant to Investment decisions.
I don't want to make decisions of financial importance for anyone. I will for myself and those I am Trustee. But Investments should be garnered as the Figs in the Baskets. Don't just look at the basket of Figs. Use your other senses to decide. Look carefully at a Mutual Fund, ETF, or Investment Plan that is similar. See what's in the Basket.
Rather than collecting billions, Bogle collected millions. But John, the hopeful visionary, went forward with that amount and started what later became the Vanguard 500 Index Fund.
Where an S&P 500 Index Fund offers the most opportunity, for Manager's, is the simplicity I tried to outline. John didn't have to charge high fees. That's because it's not demanding of his time or an employees. Therefore, Investors get a competitive and risk averse growth rate and they aren't beat-up with fees depriving them of their gains.
When you're looking through your 401K, IRA, ETF, or Investment options, it's a good idea to start with something that indicates it is an Index Fund. There can be variants. For example, there are Utility Index Funds, Telecom Index Funds, Bond Index Funds, and Gold Index Funds. There's no shortage of highly motivated (Money Seeking) Investment Managers willing to take a gamble with your cash.
If you investigate and compare them to an S&P 500 Index Fund, over 10 years, you're likely to find they lagged in growth. They might be comparable, or better, Short-Term. But historically the S&P wins.
There was a now famous bet that came to a close. Warren Buffett waged a bet against a Fund Manager. $1M that the Fund Manager couldn't beat the S&P. One would think they could dig-in and extract a handful of investments, even from the companies in the S&P, and beat the Index. But it has proven very hard. Some actually lose, badly. Warren won the bet, against a professional Hedge Fund Manager.
So I encourage everyone, when looking for a safe, growing, risk averse option... seek something that is based upon the S&P 500 Index. If not the S&P, a large and scalable Index Fund. It should have less fees, stable growth, and outperform most other Funds or Stocks over time.
I bring this post to a close with some difficulty. I believe writing is a one way conversation, anticipating the audience (Writing as one would speak, Prose). It helps evolve ideas for both the reader and writer. A way to convey inner thoughts and the working of the mind. It has evolved human intelligence over a long time.
I've been told many times (even this morning) that I should seek employment with an Investment Bank. But the truth is, I hate giving Investment advice. And... I never completed my Degree. I invest cautiously, with my money only.
As I assume a reader may presume (That was deliberate), I don't love Money. I love the brilliance of our economic system and the empowerment, possibility, and opportunity to harvest profit for the future. That is how money should be viewed. It's not the object the should be loved. It is the system. It is putting away profit, from work, for future needs.
But our economic system has the time-value factor. Your money will lose value, if sitting idle. It needs to buy assets that can generate or later be sold for a profit. It is an employee!
Considering John recently passed away, I reflect on the Bible. In the Prophecies, specifically the Book of Jeremiah, was a Teaching. The Lord presented to Jeremiah two Baskets of Figs. He asked Jeremiah, "What do you see?". Jeremiah replied, "I see two baskets of Figs my Lord". The Lord spoke, "No Jeremiah, the one basket has firm figs, the other rotten".
That lesson is outlined as, "You can't judge a book by it's cover". I believe the Biblical lesson is much more plausible in delivering a message, "It's hard to Judge from sight alone". But Jeremiah could have asked to smell them, touch them, even taste the figs. I know I am no different than Jeremiah. You too. I see this relevant to Investment decisions.
I don't want to make decisions of financial importance for anyone. I will for myself and those I am Trustee. But Investments should be garnered as the Figs in the Baskets. Don't just look at the basket of Figs. Use your other senses to decide. Look carefully at a Mutual Fund, ETF, or Investment Plan that is similar. See what's in the Basket.
