The Bogleheads' Guide to Investing, 2nd Edition

Chapter Two Start Early and Invest Regularly

Adding time to investing is like adding fertilizer to a garden: It makes everything grow.

—Meg Green Miami, Florida, Certified Financial Planner

In February 2005, Jack Bogle and a small number of Bogleheads met for an informal dinner in Orlando, Florida. During the course of conversation, Mr. Bogle mentioned receiving a letter from a Vanguard shareholder some weeks back. The person writing reported that he had been investing since the mid-1970s with Vanguard. Since that time, the value of his portfolio had grown to $1,250,000. But here is the interesting part: He never earned more than $25,000 per year in his lifetime.

Did that get your attention?

You may be asking, “How is that possible? Is he a stock market wizard? Did he have a great advisor? Did he win the lottery? Did he rob a bank? Did he inherit a bundle? Was he just lucky?”

We don’t know the person or anything about his investing history. But the likely truth is that he accumulated a small fortune through consistently saving and investing over time. Anyone can do it, although very few choose to do it. It turns out that an investment of $601 at the beginning of each month in stock index funds, coupled with an average annual return of 10 percent, grows to the sum of $1,249,655 in 30 years. Incidentally, $601 a month is approximately 28.9 percent of a yearly salary of $25,000. And in case you might be wondering, yes, the math works the same for everybody.

THE MAGIC IS IN THE ...