Index Your Way to Investment Success
By IndexFunds.com Staff
1999
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Among indexing books, Index your Way to Investment Success
has the most comprehensive description of how to build an investment
plan. It presents a simple investment strategy and then describes
ways to enhance the strategy in hopes of higher return.
The authors start off with the obligatory ode to
the advantages of index funds. They also include some interesting
passages about the early history of passive investing and the
derision with which the early indexing proponents were met.
Next, the book looks at the indexes tracked by index
funds and gives a thorough description of how they work and how
index funds are run. An analysis of the cost advantage of index
funds is then presented which includes operating expenses, transaction
costs, sales loads, and taxes. From this exercise, the authors
devise what they call the "rule of 1-2-3":
| "In order to equal the return of the benchmark
index fund, the actively managed mutual fund must invest in
issues that average a significantly higher annual rate of
return: about 1% for bonds, 2% for large-cap stocks, and 3%
for [mid- and small]-cap stocks." (p. 129) |
