I’ve always seen the stock market as one of the most powerful tools for building wealth ever invented. It’s a space that I firmly believe should be open to everyone, not just a select few. That’s why is a question more people should be asking. There’s a place for every kind of personality and strategy here.
If you're looking for the secret to investing, I’m confident that for most American families, the answer is surprisingly simple. It involves owning your stocks through a broad market index fund, like one that tracks the S&P 500, and your bonds through a total bond market index fund. Warren Buffett agrees, stating that for most people, the best way to own stocks is through a low-fee index fund—a path that will almost certainly beat the net results of the majority of investment professionals.
Back in 1993, while writing my book , I explored the countless asset allocation strategies available to investors. It struck me then that sometimes, “less is more.” I had a hunch that a simple, mainstream balanced fund—60% in U.S. stocks and 40% in U.S. bonds, all in a low-cost index format—could offer the same functional benefit as hiring a high-priced investment advisory firm.
When you’re just getting started with investing, it’s easy to get overwhelmed. But what if I told you that one decision accounts for nearly all of your results? For anyone , this is the place to focus. A landmark study found that a staggering 94% of the difference in portfolio returns comes down to a single choice: your asset allocation. This is the strategic mix of stocks and bonds you decide to hold. It's more important than picking the “perfect” stock or timing the market. Getting this right is the foundation for anyone treating to build long-term .
When you think of Benjamin Graham, the author of the 1949 classic , you probably think of value investing—the meticulous art of finding bargain stocks. But what many don't realize is that Graham had a very different message for the vast majority of people, one that feels surprisingly modern and is essential for anyone interested in .
Since the first index mutual fund launched back in 1975, the traditional, long-term approach to indexing has been a massive success. For anyone just getting into , it's a proven model. These funds, which simply aim to track a broad market index like the S&P 500, have consistently delivered returns that leave most actively managed funds in the dust. This is one of the most important lessons in .
Over the past decade or so, the classic principles of the traditional index fund (TIF) have been met with a challenger that looks a lot like an ally: the exchange-traded fund, or ETF. At its core, an ETF is an index fund specifically engineered for easy trading. If you’re , it's crucial to understand this distinction. The original index fund, created over 40 years ago, was built on a long-term investment philosophy. In contrast, using an index fund as a trading tool is, by definition, short-term speculation. This is a fundamental difference when it comes to .
When it comes to investing, most of the attention goes to the stock market. But the simple, straightforward math that governs investing success applies even more powerfully to bond funds. While countless factors can sway an individual stock, the bond market dances to the rhythm of a single dominant force: the prevailing level of interest rates. Fund managers can’t do much to change those rates, making their job fundamentally different from that of stock pickers. This is a core concept in .
Trying to pick winning investment funds feels a lot like searching for a needle in a haystack. And if you try to pick them based on recent hot performance, you’re more likely to end up disappointed than successful. It's a common challenge for anyone new to . So, it’s natural to think, why not just hire a professional?