April 13, 2013

When you invest your money, what are the two biggest variables that will explain your final return?

14 thoughts on “April 13, 2013”

  1. Aaron says:

    Taxes, growth and also fees.

  2. Thomas Graham says:

    I think that the two biggest variables are the interest and time.

  3. Katherine Graham says:

    Fees and interest?

  4. Mike Finley says:

    Here is a little help. Fees are one of the variables. Empirical evidence provides this evidence. The other variable which is by far the biggest variable is still missing. Consider the entire portfolio when deliberating over this answer.

  5. Thomas Graham says:

    The diversity of your portfolio could be the other variable.

  6. Alex says:

    Fees and asset allocation.

  7. Mike Finley says:

    Some mighty close answers, but Alex was right on the money. The fees you pay which you have total control over and the asset allocation (how much stocks you own in relation to how much bonds and cash you own) will decide almost all of your entire return over time. So what does this mean?

    (1) Get your fees down to the lowest possible denominator. This is easy to do by owning no-load index mutual funds at Vanguard. Eliminate all other options. You don’t need them and you cannot afford them.

    (2) Identify what asset allocation model is right for you. You can go here: https://personal.vanguard.com/us/insights/saving-investing/model-portfolio-allocations to identify how different asset allocation models have done over time.

    KEY POINT: Once you decide on your asset allocation (consider your risk tolerance, goals, and time horizon when doing this) buy those index funds, rebalance every year or so, and otherwise LEAVE IT ALONE! People screw this up by messing with the amounts because they hear something on the bubetube or some “expert” on the internet said you should do this or that. IGNORE THEM! Focus on learning more about investing (The Four Pillars of Investing, by William Bernstein is an excellent book.) as you continue down your course of being a wise and efficient investor. Well done, Alex!

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  9. Prabhakar says:

    Hi Brittany: I am looking to share a room also. I aleardy have a room reserved for Thursday and Friday and would be open to sharing it with you. Let me know. Thank you, Annie

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