boglehead on boggle board

Get Rich Slowly By Following Vanguard’s Bogleheads

Bogle, NOT Boggle

You probably have good reasons for not investing in the stock market. For example, lack of knowledge, fear of losing money, a general mistrust of brokers and advisors and not having enough money to invest. On top of that, most of you probably didn’t have parents who taught their kids the importance of investing at an early age.

I was lucky.  Both of my parents are in financial services and taught me the importance of working and saving money. However, anyone can learn good financial habits and it’s never too late to get started.

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One of the best things my mom has done for me is introduce me to the Bogleheads and their book, The Bogleheads Guide to Investing by Taylor Larimore, Mel Lindauer, and Michael LeBoeuf.  Last year my mom and I attended their annual financial conference. As a sixteen year old, I was the youngest person attending.

What’s a Boglehead? The Bogleheads are a group of people just like you and me who have an interest in investing and like to follow the principles of Vanguard founder, John C. Bogle.  The Bogleheads have an online forum at Bogleheads.org where investors share ideas. Each year they hold a conference where the Bogleheads meet and talk to well-known financial figures.

Benefits of passive investing

The first lesson I learned is that you don’t have to be Warren Buffett to be a great investor. The Bogleheads emphasized that you do not have to spend hours and hours trying to identify the stocks that will consistently beat the market.  They encourage a strategy of passive investing rather than active investing.

…even Warren Buffet has instructed that after his death, his wife’s estate should be put into passive investments like index funds.

In fact, day trading (aka actively buying and selling stocks) leads to losing money 80% of the time according to one study.  The Bogleheads caution against being an emotional investor because this leads to making too many changes and poor investment returns in the long run. Mr. Bogle recommends investing in a diverse portfolio and investing in low-cost index funds. For example, the Vanguard Total Stock Market Index Fund (VTI). [Editor’s note: we are not paid by Vanguard. They’re just a great, not-for-profit company and the pioneers of low cost passive index investing].  There are plenty of other index funds by different companies that one can invest in as well.

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If you doubt that you can beat the vast majority of active investors, while only spending a few hours a year doing it, The Little Book of Common Sense Investing, by Jack Bogle, explains the strategy and statistical evidence to back up his advice. Jack Bogle mentioned that even Warren Buffet has instructed that after his death, his wife’s estate should be put into passive investments like index funds.

A fun way to teach kids about investing

One of the topics Bogleheads discussed was how to get the younger generation–my generation–interested in personal finance and investing.  The Bogleheads panel of experts expressed their concern that the younger generation doesn’t seem to care about finance.  Jonathan Clements, a member of the panel who is the creator of the HumbleDollar blog, talked about how some of his kids’ friends are finishing college and taking a year to travel the world, then returning to be Starbucks baristas, with little hope of paying off their college debt quickly.

Parents can do a lot to get their children interested in investing.  For example, parents can take their young kids into a store like Starbucks and show them a cup of coffee. Then explain that when someone buys a cup of coffee from Starbucks, the people who have invested in Starbucks will make money. Consider buying a share of a company like Apple, Starbucks, or any company that produces products that your child uses.
This can also be an opportunity to show your kids that they can vote with their wallet by supporting companies whose values align with their own.  For example, instead of buying a bottle of shampoo that is produced by a company that is bad for the environment, kids can buy bottles of shampoo that are produced by eco-friendly companies.  I think that it would be great if parents taught their children about basic investing principles like these so that their children have an incentive to make money through investing.

Being a conscious consumer builds good money habits

The conference isn’t only about investing. There was a lot of discussion about personal finance and how to be a smart consumer. The Bogleheads encourage being careful with expenses and not wasting money. They even recycle the plastic name badges they use at the conference each year.  They emphasize allocating a meaningful amount of your monthly income each month toward saving.   It’s never too late (or too soon) to start building your financial well-being.

The conference as a whole was incredibly entertaining, educational, and a valuable experience. While I highly recommend attending the conference if you can, I recognize this may not be possible for everyone. Check out https://www.bogleheads.org/ and read the books that I mentioned. These are amazing resources and you will gain so much valuable information. Happy investing!

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