Money made the Warren Buffett way
My smartest investment has been putting money into an S&P 500 index fund. It has outperformed my other mutual funds and my individual stocks. Warren Buffett is right — but it’s less fun!
If you don’t have the time, interest or skill to study stocks and carefully select which ones to buy, you can instead choose to invest in a lowfee, broadmarket index fund such as one based on the S&P 500 (an index of 500 of America’s biggest companies).
That may seem like you’re taking the easy road and settling for slower growth, but you’re not — because, just as your experience suggests, index funds tend to outperform most other mutual funds. Indeed, over the past 15 years (as of the middle of 2019), a whopping 90% of largecap stock funds underperformed the S&P 500.
Investing in individual stocks can be more exciting: When they’re rising, they will often soar faster than funds do, and it can be fun to cheer on the companies in which you’ve invested. But as you noted, even Warren Buffett has recommended index funds for most investors.
Even if you have most of your longterm dollars in one or more index funds, you can always invest in some individual stocks for fun and perhaps a chance at great gains. Over long periods, it’s hard to beat the stock market.
The Fool responds: How and why do companies decide to pay dividends?
If a company’s management expects reliable cash generation in the years to come, it may reward shareholders by paying a cash dividend — and it won’t want to stop doing so, as that would suggest trouble. That dividend will likely be a portion of earnings, and will typically be a fixed sum paid each quarter.
Companies may also deploy earnings to pay down debt, buy another company, build more factories, hire more workers, buy more advertising and so on. Young or quickly growing companies often don’t pay dividends but instead reinvest all that money into growth.
What subjects should I master to become a good investor?
Gaining a solid understanding of financial accounting will allow you to make sense of companies’ financial statements and spot red flags.
Books such as
John Tracy and Tage Tracy (Wiley, $23) can help.
Reading broadly about psychology, science, history, business and more can also make you a savvier investor. by
- The Dallas Morning News
- 12 Jan 2020
- B.T. H.T., Gainesville, Fla. P.L., Charleston, S.C. How to Read a Financial Report
My smartest investment has been putting money into an S&P 500 index fund. It has outperformed my other mutual funds and my individual stocks. Warren Buffett is right — but it’s less fun!
If you don’t have the time, interest or skill to study stocks and carefully select which ones to buy, you can instead choose to invest in a lowfee, broadmarket index fund such as one based on the S&P 500 (an index of 500 of America’s biggest companies).
That may seem like you’re taking the easy road and settling for slower growth, but you’re not — because, just as your experience suggests, index funds tend to outperform most other mutual funds. Indeed, over the past 15 years (as of the middle of 2019), a whopping 90% of largecap stock funds underperformed the S&P 500.
Investing in individual stocks can be more exciting: When they’re rising, they will often soar faster than funds do, and it can be fun to cheer on the companies in which you’ve invested. But as you noted, even Warren Buffett has recommended index funds for most investors.
Even if you have most of your longterm dollars in one or more index funds, you can always invest in some individual stocks for fun and perhaps a chance at great gains. Over long periods, it’s hard to beat the stock market.
The Fool responds: How and why do companies decide to pay dividends?
If a company’s management expects reliable cash generation in the years to come, it may reward shareholders by paying a cash dividend — and it won’t want to stop doing so, as that would suggest trouble. That dividend will likely be a portion of earnings, and will typically be a fixed sum paid each quarter.
Companies may also deploy earnings to pay down debt, buy another company, build more factories, hire more workers, buy more advertising and so on. Young or quickly growing companies often don’t pay dividends but instead reinvest all that money into growth.
What subjects should I master to become a good investor?
Gaining a solid understanding of financial accounting will allow you to make sense of companies’ financial statements and spot red flags.
Books such as
John Tracy and Tage Tracy (Wiley, $23) can help.
Reading broadly about psychology, science, history, business and more can also make you a savvier investor. by
