Thomas Wang has been a mutual fund investor since 1990. His initial strategy of using Money Magazine top 10 picks produced poor results. John Bogle’s “Bogle on Mutual Funds” revealed the power of index funds to him. Thomas became a reader of personal finance books from many authors, including Frank Armstrong and Richard Ferri.

Thomas participated in Bogleheads forum when it was still hosted at MorningStar. He also worked on the debut launch of “Armchair Millionaire” web site in 2001. Currently he writes under the handle of “Tyler Aspect” at bogleheads.org.




Diversification reduces exposure to any one particular asset or risk.


Don’t put all eggs in one basket!


A respectable company such as PG&E can still go bankrupt. Individual bonds can go into default. (Orange County in 1994, Puerto Rico in 2015)


The lifetime of a single company is probably shorter than your investment horizon. (Kodak in 2012, General Motors in 2009) Some final value of individual stocks eventually becomes worthless.


Individual economic sectors can go into favor or disfavor periodically.


Broadly diversified stock index funds and bond index funds solve these issues.


Control capital gains tax with index funds – keep buying during working years; delay selling until retirement.


Free Online Tools on Portfolio Comparison

www.portfoliovisualizer.com


Visit “Backtest Portfolio” tool.


Portfolio #1 – a sample portfolio for investor at age 50

40% Total Bond Market Index Admiral Shares : VBTLX

48% Total Stock Market Index Admiral Shares: VTSAX

12% Developed Markets Index Admiral Shares: VTMGX


Portfolio #2 – a sample portfolio for investor at age 60

50% Total Bond Market Index Admiral Shares : VBTLX

40% Total Stock Market Index Admiral Shares: VTSAX

10% Developed Markets Index Admiral Shares: VTMGX


Compare average return (CAGR), best years, and worst years.


Year 2004 to 2014 spans over an economic recession, thus I favor this time period for comparison.


Higher performance might not indicate a better choice! (driving by looking in the rear-view mirror)