Buffett Says best way to invest is simply to buy index fund?

[1C5]

Just reading "The Intelligent Investor" and in one of the endnotes it claims that Buffett said this in 1996 or 97.

Thoughts? Opinions? Not individual stocks, not mutual funds, just the good old index fund...hmmm

[icetonez]

He says index funds are best for the defensive investor (those who can't or don't want to do the resarch for individual stocks)

For the average person, this is very good advice. It is VERY difficult to beat the market on a consistent basis (look at the track record of mutual funds compared to the s & p over 10-15 year periods, and these guys are proffesionals) without a fundamental knowledge of investing and a willingness to put in the man hours searching through stocks.

Index funds do three things:
1. Instant diversification
2. Gives you a consistent track record of 11% to look for in the future
3. Prevents you from eating up brokerage costs from trading

However, in recent years it has been estimated that the returns for index funds will not be as high as in past years due to the millions of people who have followed this advice and put all their retirement funds into index funds.

Props on picking up the intelligent investor, one of the greatest texts available for finding a consistent way to beat the market (value investing is THE best system). The key to investing, and it can't be overemphasized, is RESEARCH RESEARCH RESEARCH, HOLD HOLD HOLD, keep RESEARCHING, and keep pushing in funds. Dollar cost averaging is a very smart idea when investing in anything to do with the stock market.

One caution, Graham puts a large emphasis on book value, but in recent years the calculation of book value has changed at the corporate level and even buffet admits that it is not as important as it once was. It still applies to a few sectors (namely financial, insurance, just to name a few), but in general, downplay slightly the importance of book value to price.

[FishHooks]

Is there minimum dollar amount to invest in an index fund? I'm just 18 with about 4k of poker money and looking to put about 2k into an index fund (other 2k left for downswings). I think that is the best bet, for stocks I need much more money. Rather than keep 2k in a bank it would be much better if I invested it. Any advice

[hoopsie44]

[ QUOTE ]
Is there minimum dollar amount to invest in an index fund? I'm just 18 with about 4k of poker money and looking to put about 2k into an index fund (other 2k left for downswings). I think that is the best bet, for stocks I need much more money. Rather than keep 2k in a bank it would be much better if I invested it. Any advice

[/ QUOTE ]

Vanguard S&P 500 is a solid index fund. Not sure of the minimum. Check their website.

[FishHooks]

I went to the website and www.Vanguard.com (http://www.Vanguard.com) and under personal finance it says 500 Index Fund Inv, with a price of $113.63. Is that right? Is there anyway to just get a fund where you just add money to it, or do you have to buy shares?

[hoopsie44]

[ QUOTE ]
I went to the website and www.Vanguard.com (http://www.Vanguard.com) and under personal finance it says 500 Index Fund Inv, with a price of $113.63. Is that right? Is there anyway to just get a fund where you just add money to it, or do you have to buy shares?

[/ QUOTE ]

You have to buy shares. I'm not sure what you mean by "just add money to it".

[bighomage]

I'm in about the in about the same situation as FishHooks, so I'll hijack his question, although I think it's what he was asking. Is there a way one could add on a little money at a time without wasting a lot of profit on commisions?

[1C5]

Yes, there is a way to do that. It talks about it in the book. I forget what way you would have to invest to do that but I know there is a way where the comissions will not be too high.

I will look into it.

[joda mas]

Try www.sharebuilder.com (http://www.sharebuilder.com)

[cwsiggy]

You can usually autoinvest into mutual funds from your bank account for as little as $50, sometimes $25.
Depends on the fund group. Seems like it would be cheaper investing in Vanguard's fund than Spiders despite the slightly higher expense ratio.

[Uglyowl]

[ QUOTE ]
Is there minimum dollar amount to invest in an index fund? I'm just 18 with about 4k of poker money and looking to put about 2k into an index fund (other 2k left for downswings). I think that is the best bet, for stocks I need much more money. Rather than keep 2k in a bank it would be much better if I invested it. Any advice

[/ QUOTE ]

SPY, an EFT, follows the S&P 500 and there are no minimums.

[1C5]

You have to buy EFTs like a common share right so they wouldn't work as well for dollar cost averaging investing?

[imported_bingobazza]

Buy Buffett, hes hammered the index over 30+ years.

Bingo

[MrMon]

You can put the $2k at Schwab and buy their S&P 500 Index fund. Just say you want to buy $2k worth. They'll give you fractional shares. You can even dividend reinvest. (I'm sure Vanguard and Fidelity work the same way, but have no experience there.)

[FishHooks]

Just found out that the vanguard index funds are 3k minimum, and you can dividend reinvest as well.

[1C5]

what are the fees like on the vanguard ones?

[Sniper]

Vanguards fees on index funds are generally very low... their S&P500 index fund has an expense ratio of 0.18%.

You can view all the info you want about all their funds, on their website.

[FishHooks]

here is a link to their fees.

http://flagship4.vanguard.com/VGApp/hnw/content/AccountServ/General/ATSMFAcctFeesContent.jsp

Vanguard fees are, from what I've read, the lowest fees in the industry. That 3k min sucks for me though was going to invest 2k but I guess I got to make some more money from poker to hit that 3k min.

[Sniper]

There are plenty of funds that have minimums lower than 3K.

[MrMon]

If you look at all the Index funds here (http://www.fool.com/mutualfunds/indexfunds/table01.htm), it appears that only one S&P 500 fund is below $2500, Kent Index Equity Fund. Lots of $2500 mins though.

Ooops. Transamerica is $1000 also.

[Richard Berg]

Why not buy Vanguard Total Retirement 2045? Much broader diversification and lower minimum.