For investing simplicity is the key to brilliance

Simplicity is the key to brilliance - Bruce Lee

This is one of the most true quotes you will ever see. This hold true in life as well in finance.

I have an inherent mistrust of people when it comes to money.  No real reason for it I guess. There has been to many occasions throughout time where power/money is misused.  Who doesn't have a friend or family member who has a financial adviser that mishandled there money and lost them lots of money.  Or an adviser that has made them good money for years, but is fleecing them with huge fees robbing them of an early retirement.  I firmly believe in not pay someone to do something for you that you can do for yourself as good or better.  This goes for anything from cleaning the house to taxes.  There is great satisfaction in going something yourself and even better to increase your talent stack.

Sit down I'm going to blow your mind.  It took me a good awhile to realize this, but you will not get rich investing. Some people do Not You.  There it is I'm sure you are dumbfound and don't believe it. I'm sure you think you are a special snowflake and you only walk on 4 left clovers. This is true and the sooner you realize it the better.  "The name of the game is not to get rich, but rather to avoid dying poor" (W. Bernstein - The Investor's Manifesto). Great quote and so true. If you want to get rich quick play monopoly.

So now the air is clear we can begin.  Mutual Fund advisers make a living trying to "beat the market" and nearly 25% of them do a year. Except usually not the same 25% every year. "The Market" usually means S&P 500 index.  If you decided to go with a managed mutual fund and luck out with an adviser on a hot streak that "beats the market" you may not.  Adviser fees and expenses eat away at your profits and into the advisers pocket.  Here is an example for one year.  Lets say the S&P 500 has a 8% return and your advisers return is 9%, but with fees of .5% with 1.0% expense your return is 7.5%.  So many adviser advertise their return, but they don't include their fees in that advert. Get the idea and that's if the adviser "beats the market". Also, no matter if you win or lost the adviser still wins. They collect their fees no matter what.

To keep things simple reduce risk and maximize returns.  There is a couple of things that can eat way at your returns.  First taxes and second fees. 

1. Taxes happen two ways first when you sell a stock either you trade it or it is sold in your funds. Second through dividends.  Adviser also make money on buying and selling the stocks which is the reason for higher expenses.  Ways to reduce risk is diversify. What is diversifying? Simple put buying different groups of stocks or types bonds.  And no diversifying is not buy Apple, Netflix and Amazon.   It is more like buying large cap small cap or industry sectors that are not related. Example agriculture stocks and no effect of tech stocks if they either goes up or down.  Remember simplicity we want low expenses with the lowest amount of risk.  We are in this for the long hall.
2. Fees are there your best bet is to listen to Jack Boggle and find lowest fees possible.  There are a whole lot of different types of fees. Some up front, some on exist, some on earnings, some just because.  To show the point.  
• Invest $100,000  
• 8% annual return over 10 year
• .5 expense/fee  - Return 206,103 
• 1.0 expense/fee  - Return 196,715
• 1.5 expense/fee  - Return 187,714

          So a 1% fee difference could cost you $18,389 over 10 years and over 30 years $214,059  👀

There are two easy ways to achieve this.  One buy a lows cost S&P index mutual fund. This will diversify your US stock holding and you will own the US top 500 companies.  This is simple and a great way to start.  Basically if the U.S market does well you do well.  Remember investing this way is for the long term 10+ years.  Put it in and forget that you did it.   Second way is invest in a Total Stock Market indexed mutual fund.  This will put you in the entire US stock market based on market size.  You will have Large, Med, and Small cap fund in there.  You can also do a Total World Stock market index to get international.  You should not pay more than .15% preferably .04% expense ratio on either of these.  Index mutual funds have very low turn over, which reduces your tax expense.


Vanguard has funds like Life Strategy mutual funds.  These fund give a balance between stocks and bonds.  They contain a combination of Stock and Bond index funds which gives you a more balanced portfolio and reduces risk.

Last:  REMEMBER this is important.  These funds will go up and down.  At least 60% of the world's stocks are held by experts (big companies or managers) so when you sell they are buying and when you are buying they are selling. Mutual funds take advantage of something magical called compound interest.  Know yourself!!!  If you can't watch your investments without getting worried and selling then don't.  Setup automatic investments and forget.  This will be the best thing you will ever do.