John Bogle on “Enhanced” Index Funds – Can They Beat the Market?
While people speak of the bond market as if it were one market, in reality, there is not one central place or exchange where bonds are bought and sold. This market is so vast that its size is difficult to imagine. Overwhelmingly, this is an institutional market. The individual investor faces many disadvantages when compared to institutions. To protect your interests, if you want to buy individual bonds, you need to become an informed investor, and you need to stick to bonds whose characteristics and risks you understand.
John “Jack” Bogle, founder and former chairman of the Vanguard Group and father of the index mutual fund, passed away last week at the age of 89. Here is an article he contributed to the AAII Journal in 2007, in which he steadfastly supported traditional passive investing in the face of fundamental-weighted indexes.
“Cash is king” is a common refrain in investing and investment analysis. Just because a company generates positive earnings doesn’t mean it will succeed. It still needs to generate cash to survive. Thus, whether a company can generate sufficient cash is what matters to stakeholders.
The payback period is a measure of how long it will take the annual dividends per share to pay back the original investment. The faster the payback, the better, assuming risk levels among your alternatives are equal. A faster payback will allow you to recover your investment more quickly and enable you to deploy the money in other assets. The longer the payback period, the greater the uncertainty of earning a positive rate of return on your investment.
Our Member Question for this week is:
Before getting married, did you discuss your partner’s and your financial situation and how the two of you would handle your finances?
Vote to answer this week’s Special Question: If you discussed your finances with your partner before getting married,
what specifically did you address?
Last Week’s Results:
Poll results are as of 9 a.m. (Central) on Monday. 2,239 respondents.
The U.S. economy is a key driver of the stock market. With some signs that the economy may be running out of steam, we asked our readers their opinion of the U.S. economy for the next 12 months. Our latest special question then asked what steps, if any, our readers take when there is a spike in stock market volatility.
There is widespread misunderstanding about what credit ratings mean, and how they affect the returns that you earn and the overall riskiness of your portfolio. This AAII Investor Classroom attempts to clear up some of this misunderstanding to help you make better investment decisions.