Taylor Larimore Quotes

“As an investor, you have a choice: you can be like the gamblers who try to beat the casino or you can be the casino by investing in total market index funds. It’s an easy choice, once your understand the odds.”

“In 1986, we moved our family securities from Merrill Lynch to Vanguard. It was a very difficult decision because our broker was a long-time friend who sometimes invited us to go sailing on his beautiful sailboard (which I now realize we helped pay for). After we left Merrill Lynch, our broker never invited us to go sailing again. Looking back, leaving Merrill Lynch and moving to Vanguard was the best financial decision we ever made.”

“Many in the financial services industry hate indexing because it is difficult for them to make money selling low-cost index funds. The industry spends billions of dollars attempting to convince us that they can help us beat the market by choosing winning individual stocks, bonds and mutual funds for us. Fact: They cannot.”

“Unlike mutual funds, individual stocks can plunge to zero. On the 50th birthday of the S&P 500 Index, only 86 of the original 500 companies still remained, showing it is possible to turn a large fortune into a small fortune with individual stocks. On the other hand, it is unheard of for a registered mutual fund to go to zero.”

“As an investor you can be well above average by settling for slightly less than the index returns.”

“Here is the crux of the strategy: Instead of hiring an expert, or spending a lot of time trying to decide which stocks or actively managed funds are likely to be top performers, just invest in index funds and forget about it!”

“If you buy an S&P 500 index fund, your investment is highly diversified and its performance will match that of 500 leading U.S. corporations' stocks. Is it possible to lose all of your money? Yes, but the odds of that happening are slim and none. If 500 leading U.S. corporations all have their stock prices plummet to zero, the value of your investment portfolio will be the least of your problems. An economic collapse of that magnitude would make the Great Depression look like Lifestyles of the Rich and Famous.”

“If you don't think those miniscule costs matter, consider this: Let's assume someone puts $10,000 in a mutual fund, leaves it there 20 years, and gets an average annual return of 10 percent. If the fund had an expense ratio of 1.5 percent, the fund is worth $49,725 at the end of 20 years. However if the fund had an expense ratio of 0.5 percent, it would be worth $60,858 at the end of 20 years. Just a 1 percent difference in expenses makes an 18 percent difference in returns when compounded over 20 years.”

“Index funds outperform approximately 80 percent of all actively managed funds over long periods of time. They do so for one simple reason: rock-bottom costs. In a random market, we don't know what future returns will be. However, we do know that an investor who keeps his or her costs low will earn a higher return than one who does not. That's the indexer's edge.”

“Index investing is an investment strategy that Walter Mitty would love. It takes very little investment knowledge, no skill, practically no time or effort-and outperforms about 80 percent of all investors. It allows you to spend your time working, playing, or doing anything else while your nest egg compounds on autopilot. It's about as difficult as breathing and about as time consuming as going to a fast-food restaurant once a year.”

“To maximize the return of your taxable account, you want to minimize the taxes you pay.”

“Most of us have learned from experience that cheap goods and services are usually not as good as more expensive goods and services. Paying more will often buy a better house, a better car, better clothing, better airline seats, and better service. It is, therefore, understandable that many investors believe that paying more for expensive funds, expensive financial advice, and expensive investments will result in better results. The opposite is nearly always true.”

“To minimize risk, investors want funds with securities that act differently. If one stock or bond fund declines in value, we want other stocks or bonds in the portfolio to gain in value. If two funds hold securities that are the same, diversification is reduced and risk increases.”