And by sh!t I mean great advice.
All of these quotes are from his 2005 book “Unconventional Success”, where the Yale endowment manager provides guidance to individual investors saving for retirement:
“Thousands upon thousands of professionally managed funds routinely fall short of producing even market-matching results.”
“Without a rock-solid belief in the fundamental principles that undergird an intelligently crafted portfolio, weak-kneed investors face the likelihood of a disastrous whipsaw.”
“Poor asset allocation, ill-considered active management, and perverse market timing lead the list of errors made by individual investors.”
“Asset-allocation decisions play a central role in determining investor results.”
“Instead of concentrating on the central issue of creating sensible long-term asset-allocation targets, investors too frequently focus on the unproductive diversions of security selection and market timing.”
“The behavioral benefits of diversification loom larger than the financial benefits.”
“Overconfidence contributes to a litany of investor errors, including inadequate diversificatin, overzealous security selection, and counterproductive market timing.”
“Sensible investors avoid non-core asset classes.”
“As a general rule of thumb, the more complexity that exists in a Wall Street creation, the faster and farther investors should run.”
“Foreign bonds offer little of value to U.S. Investors.”
“Buying yesterday’s winners and selling yesterday’s losers inevitably hurts tomorrow’s performance.”
“When markets make radical moves, investors demonstrate either the courage or cowardice of their convictions.”
“Regression to the mean, one of the most powerful influences in the world of finance, explains the tendency for reversal of fortune.”
“Rebalancing to long-term policy targets plays a central role in the portfolio management process.”
“Individuals who attempt to compete with resource-rich money management organizations simply provide fodder for large institutional cannon.”
“Sensibly constructed indices, such as the S&P 500 and the Wilshire 5000, exhibit low implementation costs and high tax efficiency.”
“ETFs promise real-time pricing and superior tax efficiency, but suffer from the necessity of dealing with the brokerage industry to make purchases and sales.”
“Unfortunately, as asset size increases, active portfolio management becomes increasingly difficult.”
“The transactions cost advantage enjoyed by index funds joins a long list of reasons to prefer the rock-solid certainty of market-mimicking returns over the will-o’-the-wisp possibility of market-beating results.”
“An examination of the abuses perpetrated throught the life of the mutual-fund industry unequivocally shows an investor-friendly mask covering the true, venal face of the industry.”
“Well-informed investors avoid lining brokers’ pockets with unproductive fees and enjoy higher expected returns from buying no-load funds.”
“Investors foolish enough to trade with full-service firms get what they deserve.”
“Sensible taxable investors reach an obvious conclusion: invest in low-turnover, passively managed index funds.”
“Fortunately for investors, two substantial fund management organizations operate on a not-for-profit basis, fostering corporate cultures designed to serve investor interests.”
“Ultimately, a passive index fund managed by a not-for-profit investment management organization represents the combination most likely to satisfy investor aspirations.”
“Only by regularly rebalancing portfolios to long-term targets do investors realize the results that correspond to the policy asset-allocation decision.”
“Rational market participants take maximum advantage of tax-advantage investing.”
“Overly precise estimates of the future may prove of little use, while more general concepts might serve a useful purpose.”
“Survivorship bias represents a pervasive problem for gathers of historical return data.”
“Roger Ibbotson’s 78 years of data show stocks earning 10.4% per annum. No other asset class possesses such an impressive record of long-term performance.”
“Sensible investors prepare for a future that differs from the past, with diversification representing the most powerful protection against errors in forecasts of expected asset-class attributes.”
“Investor surveys show that a large majority of individual investors fail to grasp even the most basic elements of bond math.”
“No other asset type comes close to matching the diversifying power created by long-term, noncallable, default-free, full-faith-and-credit obligations of the U.S. government.”
“TIPS constitute a compeling addition to the tool-set available to investors.”
“By following a disciplined policy of maintaining a well-diversifed set of portolio exposures, regardless of market zigs and zags, investors establish the conditions for long-run success.”
“Sensible investors avoid speculating on currencies.”
“A modest allocation to emerging markets stocks contains the potential to enhance the risk and return characteristics of most investment portfolios.”
“As the preeminent practitioner of indexing for individual investors, Vanguard stands atop the industry in terms of excellence in tracking a wide variety of markets.”
“With its inflation-sensitive nature, real estate provides powerful diversification to investor portfolios.”