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Old 11-05-2013, 04:24 AM   #21
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Join Date: Mar 2006
Location: Houston
Posts: 4,337
Originally Posted by HappyOutsourced View Post
Thank you for suggesting a book, 2B. I like reading financial books. I'm going to see if I can find Millionaire Teacher. Have you ever read ' The Only Investment Guide You'll Ever Need' by somebody Tobias? It's written in a jovial style but very practical.
I've read it and have also given that to my children. It's a very practical book on living your financial life but it doesn't have much on investing. I seem to recall a single, short chapter -- "Down at the Track" I think it was called.

Millionaire Teacher is about $9 on Amazon and many libraries have it. It is very simple to read and understand. It's written for a total novice. It gives some statistics but they are presented very clearly. It was the first book that my DW actually read all the way through and she now seems to understand the whole concept. I believe that this book is all you really need to be successful. If you want to make it a hobby, there are other books.

A more involved book that covers the subject more fully is William Bernstein's Investor Manifesto. It's also on Amazon and at most libraries. It gets more into the details and discusses variations in greater length than Millionaire Teacher. If you really want to flog yourself, read W. Bernsteins' Four Pillars. Here the math gets deep and only the truly committed make it through. I found it dull beyond description. It was like reading a scientific journal.

DIY is not difficult. You need to develop an asset allocation but people that overwork this really don't get value for their effort. You can merrily data mine and show various combinations of small cap, mid cap, growth, value, large cap, REIT, etc outperform for some period in the past. Usually, the differences are small and can not be guaranteed to be better than a more simple allocation. If you are happier chasing data and having nine or more indexes, go for it. I have four equity indexes and CDs for my fixed income.

I have 40% equities since FireCalc gives me the highest probability of success over 30 years at this level. Of my equities, 60% is large US cap with most in Vanguard Total Stock Market Index (VTSAX). Vanguard small cap (VSMAX) is 10%. Vanguard Developed Market Index (VDMAX) is 20%. Finally, Vanguard Emerging Markets (VEMAX) is 10%.

My fixed income is all in CDs plus a safe emergency fund in cash. They are laddered out to 2 yrs due to the lack of reward for stretching out to 5 yrs which is what I would do if interest rates were "normal." I avoid bond mutual funds but opinions vary here as to the effect on principle during rising interest rates.

The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
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