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Is it worth it being a Boglehead?

Over the last few weeks, there were some opposing views about index investing written in the Globe and Mail.  In a column entitled Can a Boglehead Approach to Investing Work? the following was written:

“Those who like the idea of simply owning index funds because of the low cost need to be cautious, says Vancouver’s Lori Pinkowski, portfolio manager and senior vice-president, private client group, at Raymond James-Pinkowski-Allen Financial Group. “They are like any other investment and need to be actively managed,” Ms. Pinkowski says. “For example, if you bought a US Equity index in 2000 it would have taken you almost 13 years to make any money on it. I can’t imagine investors would be happy with that.”

No money made over 13 years in U.S. equities?  Is that the power and returns that comes with indexing?

“Bogleheads” take their name from Vanguard Group founder John Bogle who favours a low-cost, simplified approach to investing using products that track the index instead of trying to beat it.  Surely the columnist knows better than to pick-and-choose time windows to isolate investment returns, since any window selected can be spun to tell a different return story.

Indexers who own products like VTI:US would be encouraged to know this ETF actually returned over 8% for the last ten years, if you pick and choose another investment window.  See for yourself here.

Thankfully, Preet Banerjee stepped up to defend the index investing approach recently writing the “Boglehead” investment philosophy goes beyond using just indexed products; investors are encouraged to spend within their means, save early and often, diversify, minimize their taxes and stick to a long-term investing plan regardless of market conditions.

With many investing articles, there is usually another side to the story so be careful when you read any article touting the high (or low) returns of any investment product.  The investment window you choose can often tell a very different tale.  If you remember that, you’ll see beyond “expert” product opinions and discover being a “Boglehead” is definitely a good thing for most of us.

Filed in: Index Investing

16 Responses to "Is it worth it being a Boglehead?"

  1. “They are like any other investment and need to be actively managed…”

    I liked that part the best. Throw on another 2% MER and we are good to go! :)

    Cheers
    Dividend Ninja

  2. Ben says:

    Spot on…you can cherry pick any time frame or performance measure to make your point if you dig deep enough. That’s why it pays to look over multiple investment cycles and environments. Making investment decisions based on a single data point is what gets many investors in trouble.

  3. >>>there were some opposing views about index investing written in the Globe and Mail

    Opposing views? I’ll stick to the research thanks, and that still says index investing.

    • Hey Glenn,

      Probably not worded perfectly in my post, but definitely indexing works for many people and the point I was trying to make, the columnist who wrote the article took a view that was too narrow: what being a Boglehead is about. Whether, it’s two funds, three funds, five funds or ten funds, I think the original columnist missed the boat.

  4. Helen_in_Toronto says:

    “Thankfully, Preet Banerjee stepped up to defend the index investing approach recently writing the “Boglehead” investment philosophy goes beyond using just indexed products; investors are encouraged to spend within their means, save early and often, diversify, minimize their taxes and stick to a long-term investing plan regardless of market conditions.”

    Preet’s comments are not relevant to this analysis: the performance of US ETF’s .

    All stock prices, and presumably all ETF’s have had some dips at certain times, such as 2000-2001, and 2007-2008.

    • Hi Helen,

      The point I was trying to make was, the original article was referring to index investing not working for many reasons, including this one:
      some investors are over-diversified leading to poor returns.

      This is not what being a Boglehead is about.

      On the contrary, Preet’s article went beyond indexing and clarified John Bogle’s investment philosophy goes something like this:

      “Live below your means
      Save to a portfolio early and often
      Choose an asset allocation that has some risk, but not too much
      Diversify
      Use low-cost index funds
      Minimize taxes
      Don’t try to time the market
      Invest with simplicity
      Stick to the plan.”

      The number of investment funds an investor has and also, the time window that columnist picked for her article was shortsighted.

  5. I was so thankful that Preet stood up to refute the ridiculousness that was the first article. I honestly think the G and M should be ashamed for even publishing such nonsense. The mutual fund industry is incredible in their quest to spin data and confuse retail investors!

    • Heck ya. I mean, there were many points I could make about that original article, but the comment about “…if you bought a US Equity index in 2000 it would have taken you almost 13 years to make any money on it. I can’t imagine investors would be happy with that.”

      Geez.

      Spin doctor.

      Thanks for your comment Kyle.

  6. Helen_in_Toronto says:

    To the Aug. 22 comment above: Can you please share which dividend stocks you own and the yield?

    • Hey Helen,

      I own a bunch of CDN bank stocks, telcos, energy companies and utilities. I disclose a number of things on this site, so I don’t want to disclose everything. I recall my yield on my portfolio is around 4%, maybe a bit more. To be honest, I don’t monitor it that much. I don’t feel I need to.

      Thanks for stopping by.

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