Live It Up Without Outliving Your Money!: Getting The Most From Your Investments in Retirement

Appendix A. Ten Lessons I Learned from John Bogle

Iowe a great debt to many other authors and teachers who have helped me understand investing. One of my favorites is John Bogle, founder and former chief executive officer of the Vanguard Mutual Fund Group.

I recommend John's The Little Book of Common Sense Investing (John Wiley & Sons, 2007) to anybody interested in successful long-term investing through index funds. I quote this book extensively. The book does a great job of teaching simple lessons that are invaluable to any investor who aspires to rise above mediocrity. With permission from John Wiley & Sons, the publisher of that book (and of the one you are reading), I offer 10 lessons here, with quotes from John's great little book.

Lesson 1

Control what you can. Many investing variables are beyond the control and even the influence of us common investors. But each of us can control, at least to a great extent, how much we pay for somebody to manage our money. Expenses, in other words. And index funds are much less expensive to buy and own than actively managed funds.

Bogle points out that management fees and operating expenses of equity mutual funds average about 1.5 percent of fund assets per year. An initial sales charge of 5 percent adds 0.5 percent annually for funds held 10 years and a full percentage point if the shares are held for only five years.

But then add a giant additional cost, all the more pernicious by being invisible. I am referring to the hidden cost of portfolio ...