I especially appreciate the authors clearly explaining how fees eat up investment returns. “Īll in all, I found THE MOTLEY FOOL INVESTMENT GUIDE to be a good, common-sense guide to investing. Nevertheless, they suggest that with proper research, many investors can beat the index funds: “If you’re able and willing to take risk beyond the index fund, there’s a wide, wide world out there. In other words, index funds should be the standard of comparison. They encourage active investors to always compare their results to an index fund. 04%.)ĭavid and Tom spend a lot of time emphasizing how well index funds do over the long run. I checked recently, and the expense ratio was only. (Note: I notice that the Vanguard 500 Index Fund has an even lower expense ratio than the authors cite. The authors note the very low fees charged by Vanguard. They point out the very low fees generally charged by index funds-but even there, some funds are greedy. “The biggest contributor to lagging fund performance is fund expenses.” The authors ask the question, “Why Do Most Funds Underperform?” Well the answer is easy: fees. “īuying index funds for the long-term? Great! You will almost certainly beat all the actively managed funds.
Here’s a good metric: “Standard & Poor’s reports that between 82 percent and 88 percent of all domestic stock mutual funds have underperformed the market’s average return.
Over the long run, almost all actively managed funds compare poorly. There’s one person who can best look out for your interests-and it’s not a stock broker: “You are the individual most personally invested in your financial success and, therefore, are the one best suited to make your money decisions.” The authors emphasize many times throughout the book how poorly actively managed funds do, compared to the market a large. I especially like the book’s theme that an investors should make their own financial decisions-and not turn over a portfolio to a professional, who has a vested interest in making fees. They note that the stock market has proven to be an excellent investment-but only when viewed over a long time frame: “The Stock Market Is Pretty Close To A Sure Thing If You Have The Proper Timeline.” The longer your time frame, the more likely you will make money. In this latest edition of THE MOTLEY FOOL INVESTMENT GUIDE, David and Tom Gardner provide some good investment advice, along with some historical perspective.
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