Today, for stock market investing, we talk about the investment techniques used by John Bogle and described in the book The little book of common sense. Let’s start with saying that Bogle explains techniques with high yield returns. In this book you will not find Forex or Stock picking techniques, but investment in long term perspective. In fact one of the secrets to earn on the stock exchange, without blowing capital unnecessarily, according to Bogle, it is to buy and hold, for a period which you can choose between 5 and 35 years and over.
Why index fund?
But to do a successful investment you need to choose the right product, not on stock market because the risk of loss is very high. But rather buy an index fund, which by various comparisons made within a period of over 30 years has always given positive results, far superior to all investments, including government bonds.
One of the reasons why index funds are winning, is due to the low taxes that index funds have. Also there are differences between the funds, there are some more expensive and some not, you have to know how to choose.
Which index fund choose?
In the choice of fund in which to invest it is important to consider the fundamentals, as Warren Buffet would say, the intrinsic value of fund. Study the price / earnings of the fund and see and his composition.
Another very important aspect is that the index fund is passively managed, you have to buy and hold, period. So yields increase and avoid paying higher expenses due to the Manager percentages of funds, plus other fees that go to increase. Certainly the index funds do not enjoy the dividends like stocks, but the gains of the index funds are far greater even without dividends.
In the short term equities go up and down without any real reason, but just reflecting what are the expectations and fears of the market, increasing the risk of incurring losses. While on index funds the success it is guaranteed like in the long run, even on monthly, weekly and daily timeframe.
Bogle recommends to use an Experienced adviser. At the right price and that in your investment strategy incorporates stocks and bonds.
You have to choose the consultant on the basis of the results obtained and not of manipulated opinions. He should not receive fees from banks, broker or other financial institutions, but only by you. Costs must be reasonable and must not exceed in any case the 1% of your capital. Above 1 million, you have to pay 0.75%, above 5 million 0.5%. As we said earlier, he has to use the passively managed index fund.
If you have questions, you can write in the comments, thanks.