With that kind of money its possible to shout over anyone who isout there

With that kind of money its possible to shout over

This preview shows page 13 - 15 out of 263 pages.

With that kind of money it’s possible to shout over anyone who is out there telling you that you can invest on your own. With that kind of money, you can hire the best PR firms, the best ad agencies, the best lawyers. You can hire authors. You can create bestsellers. You can have your guy on TV all day long on talk shows. You can come to define reality for millions. And that’s exactly what the financial services industries have done. It’s the lie they’re going to keep selling, even after the economic disaster their so-called experts have helped create. Trust me, they’re going to do whatever they have to do to keep investing your money. They don’t want you doing this on your own. They want to keep you a captive client. They want you ignorant about the truth of investing. They want your money to keep coming in. After writing Rule #1 , I began to see how hard it is for people to break away from the clutches of mutual funds and managed IRAs and 401(k) plans. Never mind that the system is set up as if it were for your benefit but actually results in guaranteed poverty if you manage to live more than about seven years after retirement. By the way, that’s your poverty, not theirs. Yours. They got rich on your money. They should. They took about 60 percent of it (I’ll explain how this happens in Chapter 2 ). But let’s be fair. Surely not all those in the mutual fund industry have blood on their hands. Surely there is some reason to believe mutual funds are a reasonable alternative for individual investors. There are some funds that do very well, right? Well, 4 percent routinely beat the market. But if the market lost 40 percent of your money, those funds could have lost 39 percent and still beaten it. What good is that to you? I did an analysis to see how many fund managers could achieve a consistent 15 percent return over ten years. * Out of 5,900 broad market funds, three managed a consistent 15 percent return. That’s right: three, or .05 percent of those funds. This is probably the reason Warren Buffett does not endorse mutual funds. Mr. Buffett believes there are only two kinds of investors: good and ignorant. Good investors can invest on their own and make a lot of money. Ignorant investors, on the other hand, should either learn to
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be good investors or just buy an index fund and forget about it. Not mutual funds. An index is like a mutual fund but doesn’t come with exorbitant fees. I’ll explain more about what these are and how to buy them in Chapter 2 . I agree. If you’re not going to invest the way the best investors invest, then you should just buy an index fund and be done with it. Accept your 8 percent maximum investment return and be happy you got that instead of the 6 percent you’d be getting if you paid the mutual fund fees. That 25 percent change in return on investment will triple the money in your retirement account… in sixty years. For some of you, that’s all you’re going to need to know. But most of you have a problem that’s going to require reading this book and taking more aggressive action. Because most of you don’t have sixty years. Some of you don’t even have ten. And so you’re going to have
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  • Spring '20
  • Warren Buffett

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