Monday, March 12, 2007

A guide to Boglehead investing

Excellent book. It really starts out well and finishes strong. There are many different aspects of this book. The books is 5 stars because it's easy, fun, and informative reading. I borrowed it from the library, but it's probably worth buying used.

It starts with talking about successful investing. Some of the steps are having an EF, investing early, maxing out all retirement options. It then moves to discussing stocks, mutual funds, and bonds. I found the bond chapters very informative. because it discusses both individual bonds and bond mutual funds.

Another informative part of what you're buying is annuities and Exchange Traded Funds (ETFs). The information is well written and easy to understand. Also it discusses buying TIPS or inflation protected bonds. I love the fact they discuss the two parts of TIPS (Fixed and variable components). Which really explains how I-bonds works.

Chapter 6 moves into determing how much you really need to save. Within this chapter there are many different tables and figures to use to gauge how much you really need to be saving. Chapter 7 discusses keeping it simple by investing in index funds, which is obviously a huge cornerstone of this book considering it's written by Bogleheads (Bogle followers). Chapter 8 goes over proper asset allocation. It discusses risk tolerance, personal situations, and guidelines for age allocation. Chapter 9 looks at keeping costs low, a very important principal/value to a boglehead. Chapters 10-11 look at taxes and how to efficiently manage your taxes while investing. These chapters focus on tax harvesting in taxable accounts, why you should focus investing in retirement accounts (401k, IRAs), and how important fund placement in either a taxable or non-taxable account is.

Chapter 12 focuses on Diversification, parallels asset allocation but a bit more in depth. Chapter 13 looks at market timing and chasing returns, a huge no-no in a boglehead's rulebook. Chapter 14 looks at investing for college examining the different accounts available like Coverdells, IRAs, 529s, etc.

Chapters 15 and 16 look at inheriting money and needing an advisor. Very short chapters.

The second half of the book looks at following through on your investment strategies. Chapter 17 discusses the importance of rebalancing your portfolio. Chapter 18 tells you to not chase returns. Chapter 19 is about mastering emotions when investing. The idea is that you have to not become emotionally attached or invested, use logic. You need to invest and avoid emotional traps. I think this is one of the most important chapters of the book because a lot of people get attached to investments (myself included), hoping it will come back. Or just other stupid things.

Chapter 20 is about discussing how to guarantee your money will last. It talks more about annuities and withdrawing less in early retirement years. Chapter 21 discusses insurance to protect your assets. Chapter 22 is about dying/wills.

And chapter 23 is just a wrap up and encouragement. There are forums for bogleheads. They is a diehard boglehead forum at morningstar where people discuss investing.I really enjoyed this book, it was fun and easy to read. Definitely worth the time to read.

1 comment:

JW said...

This sounds like a really good book. I'll look for it at the library this evening on my way to my second job.

Thanks for the thorough and concise review and tip.