The Bogleheads’ Guide to Investing

The Bogleheads’ Guide to Investing
By Taylor Larimore, Mel Lindauer, and Michael LeBoeuf
(c. 2006, J. Wiley)


PART 1:   ESSENTIALS OF SUCCESSFUL INVESTING

CHAPTER 1:   CHOOSE A SOUND FINANCIAL LIFESTYLE

Steps to take before you start investing:
• Graduate from the paycheck mentality to the net worth mentality.
o Success is not how much you make, but how much you keep.
o Household net worth statistics on page 9.   US median = $86,100
o Make it a habit to calculate your net worth at least once per year
• Pay off credit card and high interest debts
o Guarantees a tax-free, high yield on your “investment.”  
o Read fine print on credit card fees, penalties for missed payments.
• Establish an emergency fund.
o Aim for 3-12 months living expenses, depending on job security.
o Make sure you have adequate insurance protection.

CHAPTER 2:   START EARLY AND INVEST REGULARLY

• “Adding time to investing is like adding fertilizer to a garden: It makes everything grow.” – Meg Green, CFP (Miami, FL)
• The magic of compounded returns:
o Rule of 72, doubling your money
o Use the leverage of your youth to make the power of compounding work.
• Saving is the key to wealth:
o If there were easy, quick secrets to wealth, there would be more wealthy people than there are today.
o “The problem with getting rich quick is you have to do it so often” – Jason Zweig
o Try to save a minimum of 20 cents for every dollar earned (20%).
o Study: only significant wealth factor was amount people chose to save.
• Finding the money to invest:
o Pay yourself first:  
 If you wait until have extra money to invest, you will wait forever.
 Take it off the top of your paycheck.   A bare minimum of 10%.
 Reduce consumption by $11/day and you can fund Roth IRA
o Commit future pay increases to investing
o Don’t drive yourself to the poorhouse.   Shop for used items.
o Move where the cost of living is cheaper.
o Create a side income
o Not all debt is bad

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