Monthly Archives: April 2011

Investing Made Simple

Investing_made_simple

http://www.amazon.com/Investing-Made-Simple-Index-Explained/dp/0981454240

INVESTING MADE SIMPLE – by Mike Piper

RATING: 8.8 out of 10

OVERVIEW: Investing success can come from simplicity.    Eliminate fear, save time, and retire succussfully.

 

 

I wish my family, friends, and blog readers would take the time to read this short book.  It will help you create a simple proven plan to protect yourself, family, and loved ones.  Investing can be a scary word but even the least informed to Wall Street traders can benefit from the enclosed investing principles.

If you knew Megan (wife) she would let you know that when I get excited about something that I live, drink, and eat it.  Investing is my next exciting topic in my life.  In no means am I an intelligent, rich, and successfully individual.  What I am is motivated to prepare for a happy retirement in my twilight years.  As a ‘rabid’ reader I’ve focused my last 6 books on investing.  Investing Made Simple is a book of simple methods and philosophy about investing.

Mike Piper, the author, is a young buck.  Don’t let that fool you.  He is smart, mature, and most of all teachable.  He doesn’t speculate and speak to things he doesn’t understand in his book.  If he doesn’t know a thing, he won’t preach to you about it.  The thing I like is that his messages are short and sweet.  If you’re interested check him out, if not it makes no difference to me. www.obliviousinvestor.com

TAKEAWAYS:

-Invest in low cost Index Funds

-Stocks outperform bonds 99% of the time

-Mutual Funds are expensive compared to Index Funds

-Buy and hold is a sound philosophy (not for individual stocks)

-Don’t listen to the financial news every day. (Monthly to quarterly is preferential) 

-Few professional traders outperform the S&P 500 (which is an available investment to everyone)

BOOK NOTES

All investment companies have their own personal interests.
-Their services are helpful but you must educate yourselves and make
the best decision for you

Fund Manager: selects the stocks, bonds, and other investment in a mutual fund.

Mutual Fund: ‘actively’ managed by a fund manager
Index Fund: ‘passively’ managed and are designed to mimic a market or trend

IRAs (Individual Retirement Accounts) and 401ks (Employee sponsored retirement accounts) are not investments but investment accounts where we can acquire investments

Roll your 401k from previous employers to your IRA.
-It provides more investment options
-avoids administration problems

Investment priority
1. Full 401k match
2. Max out Roth  or traditional IRA
3. Max out 401k
4. Invest via taxable amounts

Stocks outperform bonds in the long run 99.9% of the time over 25 years.

You have a slim chance of winning at individual stocks.
-You’re competing against pros

*Less than 34% of actively managed stocks outperform the index their
competing against.

The cost of stock fund management is around 1.5% where index fund
management is .2%.

In your 401k account seek for portfolios with low expense ratios.

As you get older your asset allocation should gradually move towards bonds

Rebalance: when your funds are off by more than x percent or once a year.

Wilshire 4500: contains all publicly traded companies minus the S&P 500.

Once you’ve selected the index to follow you need to self the fund in
which you’ll invest.
1. Low expense ratios
2. Meet the minimum investment amount
3. Customer Service and online interface

Exchange Traded Funds (ETF): Are like mutual funds except they’re
traded like stocks.

Don’t Peek:  If you don’t have self control look at your portfolio
more than 3-4x per year. Let the long-term investment work its magic.

Buy low, sell high. Don’t sell when the stock is high, sell it when you retire.

The Fact if a fund has been successful for consecutive years doesn’t
guarantee future success.

Don’t read popular magazines to choose the ‘hottest’ new stocks.

**Very Few pros outperform the market

Conclusion: diversify, buy low cost index funds and invest long term.