Peter Lynch was Wrong

I love you man, but you’re wrong!

Legendary Fidelity Magellan fund manager Peter Lynch wrote "buy what you know" in his classic book, One Up on Wall Street: How to Use What You Already Know to Make Money in the Market. The basic principle is simple: you're more likely to be successful in the market if you buy what you're familiar with. Peter Lynch was wrong; or at least he wasn’t quite right.

The Tax Advantage of Index Funds

The end of the year tis the season investors usually focus on managing taxes, but you don’t have to scramble for last-minute tax strategies to try to lower your tax bill. The market-tracking structure of index funds can help keep your portfolio tax-efficient throughout the year.

Taxes are one of many possible investment costs that can include fund expenses, management fees, administrative charges and so on.

Five Wins for Index Funds

Index funds are a superior investment product to funds that try to beat the markets. Their low fees, low turnover, and broad diversification provide the highest probability for long-term success. An investor’s best chance for meeting a financial goal is a portfolio of low-cost index funds that is well allocated across multiple asset classes (Read All About Asset Allocation for more details).

When Fund Selection Is Done Right

What funds should you buy? Should it be index funds or exchange-traded funds, or low-cost actively managed funds, or should you pay an adviser for access to special products like DFA funds? This is an important question — but it’s often the wrong question.

The products used to construct a portfolio are a function of a portfolio’s purpose. Get the purpose right first and then select the product.

Many people don’t invest this way. They generally want to talk about products, not purpose. They put the cart before the horse. They invest like they buy automobiles.

Schwab ETFs Struggle in the Shadow of Vanguard

Charles Schwab would like to say they have Vanguard ETFs in their sights, but that would require a very powerful telescope. It isn’t realistic to compare the two ETF providers yet because Vanguard dominates in number, total assets, and even performance. That being said, I commend Schwab’s efforts to promote low-cost index investing and hope they continue.

New Fees For Some Index Funds

When is an old fee a new fee, which isn’t really a fee? When it’s listed under “Acquired Fund Fees & Expenses.” These fees have always been part of the total cost that some fund investors pay, yet only recently has the Securities and Exchange Commission (SEC) required that these fees be reported as additional expenses.

What Was John Bogle Thinking?

John C. Bogle was hired by Wellington Management Company in 1951 immediately following his graduation from Princeton. Hard-driving Bogle became President of the company in 1967, the fund company’s CEO in 1970, and was subsequently fired in 1974 for a bad decision. With Mr. Bogle’s permission, this article documents new information about his early career and about the fund industry during that time.


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