Should I invest in vanguard index fund?

[Willies]

I heard a lot about index fund and vanguard. Should I invest in vanguard index fund?

[Scott Bradley]

I heard a lot about index fund and vanguard. Should I invest in vanguard index fund?

No!!!

Get financially educated FIRST to figure out how to invest your own money!

Going to someone and just giving them your money to invest is one of the WORST things you can do.

While it does take more time to figure out how to invest your money, the returns you will get for doing so over the long run will be FAR greater than what you could make in some mutual fund/CD or Government security.

I would recommend starting with Rich Dad Poor Dad by Robert Kiyosaki and then read everything he has written. It will give you a sound financial base, and will be able to guide you in the right direction.

[n/a]

Going to someone and just giving them your money to invest is one of the WORST things you can do.

While it does take more time to figure out how to invest your money, the returns you will get for doing so over the long run will be FAR greater than what you could make in some mutual fund/CD or Government security.

Going with an index will keep you up with inflation but that's about it. But you are on the right track with thinking Vanguard. Vanguard has one of the lowest expense ratios in the industry. If you are looking for safer returns in the LONG TERM (must I say stocks should only be bought on the long term!) then vanguard is a good bet. I would look at some of there internationals, right now they are pretty beat up (great time to buy buy buy!) Buy things while no one wants them, they are devalued, but make sure that industry has solid financials and future outlook. I can go on forever

I used to work at Vanguard and I would feel really safe putting your money there. If you are wanting to dabble in more risky returns like this guy above you is pointing out than look at more internationals and real estate type ventures. Thats only if you don't mind taking the major risk!

[YOLANDA]

Vanguard is a great company if you just want index fund. Vanguard started the index fund revolution and is probably one of the best in offering index fund choices, although fidelity and others have somewhat caught up on the low fee structure. You can also go with ETF on index investing which allows you to trade intra-day.

If you want to invest in more than just index fund, you want to make sure you stay with great fund managers. Most of the fund managers are not that good and not worth the fee they charge, but a few of them are just excellent and you should find a few and stick with them. Check out. It has a report on the best active fund managers based on historical performance, volatility, fee, manager tenure etc.

[Scott Bradley]

I heard a lot about index fund and vanguard. Should I invest in vanguard index fund?

There is an awesome website that will also help you.

Your Money Mogul - Mindset & Financial IQ for Gen Y

[jasaunders]

Scott, you really are obsessed with RK aren't you?
The blog you posted contains so much false information that is backed by absolutely no facts its ridiculous. It would be nice to see the author post sources for his false information and back up his statements.

Sure, there are higher yielding investments than many mutual funds, but they are also higher risk. You seem to be implying that you can invest in higher return vehicles with the same or lower risk, and this just isn't true. It can't be, because if this existed, arbitrage would take place and it would no longer exist. Its a free market and near perfect information exists for investors to invest in a model that returns a reward to the risk associated with it over the long-term.

[Scott Bradley]

Scott, you really are obsessed with RK aren't you?
The blog you posted contains so much false information that is backed by absolutely no facts its ridiculous. It would be nice to see the author post sources for his false information and back up his statements.

Sure, there are higher yielding investments than many mutual funds, but they are also higher risk. You seem to be implying that you can invest in higher return vehicles with the same or lower risk, and this just isn't true. It can't be, because if this existed, arbitrage would take place and it would no longer exist. Its a free market and near perfect information exists for investors to invest in a model that returns a reward to the risk associated with it over the long-term.

I love Robert Kiyosaki. He changed my life after I read his book...so of course I am going to continually promote his ideals and values.

I am curious, what do you think on that blog is false? I would love to get a discussion going about this to dig deeper into what you think is wrong on the blog.

As far as your point regarding your quote about what you think I am implying "you can invest in higher return vehicles with the same or lower risk" I am not implying this at all....Sure greater risk comes with greater reward, but to mitigate that risk getting financially educated FIRST is the first crucial step to understanding your financial plan for your future.

The reason I felt moved to initially participate in this discussion is because I am sick and tired of seeing people going to their friends or financial planners asking for personal financial advice without first educating themselves about what it takes to achieve whatever financial goals that they would like to achieve for themselves.

[n/a]

well you can self educate yourself all you want. But its not going to do any good if you are reading hyped up or false information. You need to get your information from proven quality sources. A university edcuation, MBA, papers and articles form wall street week, forbes etc. Quality articles that have been proven in that industry. Some people try to cheat the system and think the risk/reward system can be broken. I don't know I always get weary of totally self educating yourself sometimes you need a guide to guide you to reliable sources. You dont have to pay someone to help you out thats what networking is for. I dunno I will stop here I can argue all day.

[n/a]

This is from the article he posted in this thread....

"the general public, however, does not have access to these investments. The poor and middle class investors are left with the "dogpile" of investments, the left-overs of whatever the accredited investors didn’t want. These would be investments like general stocks, bonds, mutual funds, ETF’s, and other slow savings vehicles. The rich drive a luxury sports car, the rest of the investment world drives a good ol’ sedan.
This is from the article he posted.

"Think about this:

1. Most of the money made in the stock market is made by those who invested while it was still a private company or "pre-IPO." After the stock gets sold to the public, the share prices typically rise, and the first investors are able to cash out and do well."

Yes and the first investors took the BIGGEST risk of the bunch. This is still a private company and the risk of loosing it all if the company flops is a greater reality! Duh they should get more bank for the buck this is why VENTURE capitol is a booming/rewarding business but also a great risk!!!!


"The general public, however, does not have access to these investments. The poor and middle class investors are left with the "dogpile" of investments, the left-overs of whatever the accredited investors didn’t want. These would be investments like general stocks, bonds, mutual funds, ETF’s, and other slow savings vehicles. The rich drive a luxury sports car, the rest of the investment world drives a good ol’ sedan.

Boo hoo! lets complain to the rich that they have better investment opps. DUH! give me a break! Of course the more money you have to put in investments the bigger the opportunities because you can now do venture capitol and realestate. You think those opportunities are closed to smaller investors? Maybe 40 years ago buy now you can get into a venture capitol pool of investors and start out with only 20,000 dollars, same thing with realestate.

[jasaunders]

Very beginning of the article:
What little financial education we do get, we as a society use to our disadvantage, as reflected in the rising national debt and the negative savings rate in this country.

There is no negative savings rate in this country. This is a false statement. The savings rate turned negative briefly at the end of 2005, but since 2006 the personal savings rate among Americans has been positive again.

Inflation is out of sight. The cost of food and fuel has sky-rocketed...

This is correct, inflation is up temporarily, but this doesn't affect loan term investment strategy. You shouldn't change your long-term investments just because for one year inflation is slightly higher. Over the last fifteen years inflation has remained between 1% and 3% on average. I think its safe to say you should use this historical range when evaluating your investment options rather than assuming inflation is going to continue to be high for the next 50 years. If it does stay high around 5.6%, I will be shocked.

Taxes will go up over time to pay for America’s debt. This means that any investments where the government can impose a tax (especially on earned income) should be minimized. Savings in a savings account, bonds, CD’s, 401(k)’s, and Traditional IRA’s are all subject to earned income taxes: the highest taxed income there is.

Sure, there are things to do to lower your tax burden, but as Lamarsh said, these things carry higher risk, which is why they offer a bigger reward (in the form of lower taxes). Investing in real estate is more risky than earning an income from a full-time job. However, tax laws are subject to change, and democrats consistently push to raise the capital gains tax, which would make the authors point even less valid. I don't think anyone can predict what the tax code is going to look like over the next fifty years. Furthermore, while the author makes a one-sided argument, they fail to mention nontraditional or Roth IRA's which are great investment vehicles for young people. By paying taxes on the investment now, you avoid paying taxes at retirement when you are in a higher tax bracket.

Many of our parents and friends will see their retirement nest eggs depleted by somewhere between 20-30% when they begin withdrawing from their 401(k)’s and IRA’s, since they will be taxed at earned income.

No kidding it will decrease 20-30%, because you have to pay taxes on it. You have to pay taxes on all income. What investments are the author "not" talking about when he implies you never pay taxes. Additionally, the author can rip on 401k's all he wants, but the majority of Americans have them because they are offered by employers and they receive a match, AKA free money, from their employers. So in essence, the author is saying don't get free money from your employer in the form of a 401k match because you have to pay taxes on it. Maybe if I win $50 million in the lottery I won't accept it because I'll have to pay taxes on that too!

There are much higher-yielding investment vehicles out there, if you have a greater financial education.

No, there are much higher-yielding investment vehicles out there if you are willing to take on more risk.

Out of the 3 different types of income (earned, portfolio, and passive), portfolio and passive are the best. While the above examples were for earned and portfolio income, passive income from real estate and other intellectual property assets are taxed at a much more favorable rate.

Why are portoflio and passive the best? Because they are taxed more favorably? They are also riskier.

The catch? In order to be able to invest in the best investments, you must first be at that level of income/net worth.

While this statement is true to some extent, this is not close to entirely being a 100% accurate statement. Just look at the emergence of angel investors around the country. Angels are investing as little as $5-$10k in new businesses and angel networks continue to see high growth.

Most of the money made in the stock market is made by those who invested while it was still a private company or "pre-IPO." After the stock gets sold to the public, the share prices typically rise, and the first investors are able to cash out and do well.

As Lamarsh said, this is an extremely risky investment. Of all angel investments, which are those who get in at the earliest stages, only 1-2 out of 10 investments end up being successful. Venture Capital investments have only a slightly higher success rate because they jump in at a later stage. Additionally, the author earlier put down investments in things like mutual funds and retirement investments. Who do you think invests in VC funds? Much of it is pension and retirement funds.

A Private Placement Memorandum is an investment where investors pool their capital together to purchase a piece of property or a business. These agreements are where deals can return percentages anywhere from 20-1,000%+.

Sure you can return 20%+ in PPMs, but you can also return 0%, and the fact is, far more return 0% than 100%. Plus, you don't need to be rich to invest in a PPM by any means.

[jasaunders]

One more thing, the post in the blog right below this one talks about Gold. The author must also be a close RK follower because RK always hawks gold as well.

The author is implying gold as a good investment by saying:
In 1971 gold was pegged at $35/ounce. Today, it’s over $800+/ounce.

Yea, that's true, but in 1980 Gold was over $850 an ounce. When adjusted for inflation, that same price would be over $2200, over two times the price of gold today. Just a little fact the author and RK leave out.

[Gaulkin]

I always say the same thing in these threads by endorsing my mutual fund CGMFX. Managed by Ken Heebner who has a better track record than Warren Buffet.

If you want to know more go ahead and read about him here:

America's hottest investor: mutual fund manager Ken Heebner - May. 27, 2008

[Scott Bradley]

well you can self educate yourself all you want. But its not going to do any good if you are reading hyped up or false information. You need to get your information from proven quality sources. A university edcuation, MBA, papers and articles form wall street week, forbes etc. Quality articles that have been proven in that industry. Some people try to cheat the system and think the risk/reward system can be broken. I don't know I always get weary of totally self educating yourself sometimes you need a guide to guide you to reliable sources. You dont have to pay someone to help you out thats what networking is for. I dunno I will stop here I can argue all day.

I agree with you 100%.
Where do you get your information from? Would you like to cite some good sources everyone in the forum could use?

What do you mean when you say, "Some people try to cheat the system and think the risk/reward system can be broken."

I agree with you about getting a guide to guide you to reliable sources.

I also agree with you about networking. As someone who is also passionate about connecting and building relationships with people to form win/win situations myself I agree with you 100%. I have a blog myself on the topic that provides value to all who read it Networking Effectively by Scott Bradley

When you say "you don't have to pay someone to help you out..." what do you mean? Are you saying that you shouldn't pay financial advisors to help you with your financial education? Or are you implying that buying $5000 courses about certain investing topics is a waste? I would love your clarification about this!

Looking forward to your reply!

[Scott Bradley]

Very beginning of the article:
What little financial education we do get, we as a society use to our disadvantage, as reflected in the rising national debt and the negative savings rate in this country.

There is no negative savings rate in this country. This is a false statement. The savings rate turned negative briefly at the end of 2005, but since 2006 the personal savings rate among Americans has been positive again.

Inflation is out of sight. The cost of food and fuel has sky-rocketed...

This is correct, inflation is up temporarily, but this doesn't affect loan term investment strategy. You shouldn't change your long-term investments just because for one year inflation is slightly higher. Over the last fifteen years inflation has remained between 1% and 3% on average. I think its safe to say you should use this historical range when evaluating your investment options rather than assuming inflation is going to continue to be high for the next 50 years. If it does stay high around 5.6%, I will be shocked.

Taxes will go up over time to pay for America’s debt. This means that any investments where the government can impose a tax (especially on earned income) should be minimized. Savings in a savings account, bonds, CD’s, 401(k)’s, and Traditional IRA’s are all subject to earned income taxes: the highest taxed income there is.

Sure, there are things to do to lower your tax burden, but as Lamarsh said, these things carry higher risk, which is why they offer a bigger reward (in the form of lower taxes). Investing in real estate is more risky than earning an income from a full-time job. However, tax laws are subject to change, and democrats consistently push to raise the capital gains tax, which would make the authors point even less valid. I don't think anyone can predict what the tax code is going to look like over the next fifty years. Furthermore, while the author makes a one-sided argument, they fail to mention nontraditional or Roth IRA's which are great investment vehicles for young people. By paying taxes on the investment now, you avoid paying taxes at retirement when you are in a higher tax bracket.

Many of our parents and friends will see their retirement nest eggs depleted by somewhere between 20-30% when they begin withdrawing from their 401(k)’s and IRA’s, since they will be taxed at earned income.

No kidding it will decrease 20-30%, because you have to pay taxes on it. You have to pay taxes on all income. What investments are the author "not" talking about when he implies you never pay taxes. Additionally, the author can rip on 401k's all he wants, but the majority of Americans have them because they are offered by employers and they receive a match, AKA free money, from their employers. So in essence, the author is saying don't get free money from your employer in the form of a 401k match because you have to pay taxes on it. Maybe if I win $50 million in the lottery I won't accept it because I'll have to pay taxes on that too!

There are much higher-yielding investment vehicles out there, if you have a greater financial education.

No, there are much higher-yielding investment vehicles out there if you are willing to take on more risk.

Out of the 3 different types of income (earned, portfolio, and passive), portfolio and passive are the best. While the above examples were for earned and portfolio income, passive income from real estate and other intellectual property assets are taxed at a much more favorable rate.

Why are portoflio and passive the best? Because they are taxed more favorably? They are also riskier.

The catch? In order to be able to invest in the best investments, you must first be at that level of income/net worth.

While this statement is true to some extent, this is not close to entirely being a 100% accurate statement. Just look at the emergence of angel investors around the country. Angels are investing as little as $5-$10k in new businesses and angel networks continue to see high growth.

Most of the money made in the stock market is made by those who invested while it was still a private company or "pre-IPO." After the stock gets sold to the public, the share prices typically rise, and the first investors are able to cash out and do well.

As Lamarsh said, this is an extremely risky investment. Of all angel investments, which are those who get in at the earliest stages, only 1-2 out of 10 investments end up being successful. Venture Capital investments have only a slightly higher success rate because they jump in at a later stage. Additionally, the author earlier put down investments in things like mutual funds and retirement investments. Who do you think invests in VC funds? Much of it is pension and retirement funds.

A Private Placement Memorandum is an investment where investors pool their capital together to purchase a piece of property or a business. These agreements are where deals can return percentages anywhere from 20-1,000%+.

Sure you can return 20%+ in PPMs, but you can also return 0%, and the fact is, far more return 0% than 100%. Plus, you don't need to be rich to invest in a PPM by any means.

Awesome job in picking out the details of discussion!

1) I would love the source you used to reference the positive savings rate in this country. A link or two?

2) With inflation...I personally believe that the government lies to us, and we really don't know what the true inflation rate is...As far as the authors opinion about it, I would contact him and ask where he gets his resource from. I am sure everyone in this forum can agree that things are getting more expensive...it doesn't take a rocket scientist to figure that out.

3) As far as taxes...I would send the author an e-mail asking him what leads him to believe that he can predict the tax code. There may be more there that he isn't saying that is leading him to his conclusion. Maybe it would be as simple as inviting him into this discussion.

4) About 401K's I would inquire with the author of the post as to why he is saying what he is saying...He may be inferring that the total value will decrease over time BEFORE people start withdrawing...I would ask for a clarification on this with him

5) As far as higher yielding investments...and greater financial education...It is all opinion...which people are entitled to...and I respect that. Personally I feel that the greater your financial IQ, and the network to help you make those investments happen for you...The Better...You can cut down your risk by being more financially educated...which is what RK preaches and lives by each and every day.

Do you not like RK?

6) As far as passive income being taxed the best...while being more riskier...It goes back to my point in #5

7) As far as angles and the "investment classes for these particular individuals"...I believe he is primarily talking about the investments only for ACCREDITED investors...who are people with a net worth of over 1M, or have an income they make per year (I don't have all of the specifics...I know he talks about them on the blog)

8) As far as pre-IPO...It goes back to my point #5

9) As far as PPM's I don't know anything about them. I would send a message to the author where he got his information about on this.

I am looking forward to your response!

[Scott Bradley]

One more thing, the post in the blog right below this one talks about Gold. The author must also be a close RK follower because RK always hawks gold as well.

The author is implying gold as a good investment by saying:
In 1971 gold was pegged at $35/ounce. Today, it’s over $800+/ounce.

Yea, that's true, but in 1980 Gold was over $850 an ounce. When adjusted for inflation, that same price would be over $2200, over two times the price of gold today. Just a little fact the author and RK leave out.

Maybe if you pointed this out to him, he may be able to edit his post.

I love discussions like this.