Education of an Index Investor

The Education of an Index Investor

The Education of an Index Investor

I listened to Rick Ferri on a podcast; it was amazing. He discussed the four stages of index investor education which, on the record, I’m predicting will change the way we talk about index investing.

Rick is known in the Bogglehead world, both from hosting podcasts and writing books.

One free service he offers is Core-4. These are simple asset allocation suggestions for portfolios for those who have reached the ultimate stage of investor education: simplicity. He says that his book will encourage folks to use these simple portfolios.

The most exciting features of his future book (which might be called “The Education of an Index Investor”) are the 3 elements and 4 stages.

Three Elements to a Successful Investment Plan

  1. Philosophy – for index investors this is pretty universal. Low expense index funds
  2. Strategy – for Rick, this is personal. Which funds in which accounts? He states it is the individual way you implement your general philosophy
  3. Disciplined – be patient and stick with it. Just Do It!

4 Stages of an Index Investor’s Education

  1. Darkness – get rich quick. What hot stock tip can you get in the doctor’s lounge. This is the pursuit of “hot stock tip that will make me rich quick”
  2. Enlightenment – reached by an epiphany that low cost index investing is the way to go.
  3. Complexity – rabbit holes such as perfect optimal allocation, products, factor investing paralysis by analysis
  4. Simplicity – you realize that none of the complexity matters, it is all about asset allocation. Complexity just provides more money for the financial industrial complex. Be simple to achieve your goals

I can’t wait for Rick’s book to come out. “Financial advisors: there are good ones, bad ones and really bad ones. So, you have a one out of three chance of getting a good one.”

Where are you in the Stages of Education? Are you an Index Investor?

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