Index Investing for Dummies Review
Index Investing for Dummies is a very useful book about investing, both for beginners as for investors with more experience. It explains and provides the tools for a simple, straightforward and effective approach for long-term investing.
In summary, you can say that it advocates buy and hold investing with low cost ETFs and Mutual Funds that follow well defined stock market indices.
The main difference with the Stock Trend Investing system is that in our system, we do not “hold” when the market starts a long-term down trend. Trend investors sell the index funds at that moment and buy them back at the beginning of a long term bull market.
Investing in the Stock Market in the Right Way
Index Investing for Dummies, like Stock Trend Investing, uses the following principles:
1. Be in it for the long haul
2. Don’t tinker too much
3. Watch what you pay the experts
4. Diversify to the hilt
5. Be tax conscious
6. Be risk-appropriate
7. Achieve balance in your portfolio
8. Buy low, sell high
9. Buy and hold, but don’t ignore
“But don’t ignore” means to Trend Investors that we “sell” when the bear market starts.
Index Investing Topics
Index Investing for Beginners and Dummies addresses the following main topics:
• The history and background of index investing.
• What is a good index and choosing the best index funds?
• A basic understanding of stock, bond, REIT, commodity and other indices.
• An exhaustive list of recommended index ETFs and index Mutual Funds.
• The main differences between ETFs and Mutual Funds.
• Practical advice around index investing.
The book explains the following main benefits of index investing:
- “By investing in index funds and eliminating the non-systemic risk, you essentially increase your anticipated return per unit of risk.”
- You can keep your investing costs down to a bare minimum when you invest in the right index funds and keep them for years.
- With index investing you know exactly what you invest in. The problem with many other mutual funds (that are not tied to a specific index) is that you are not always clear on what you buying; e.g. it is not clear what the style, size or location is of the companies that have issued the stocks or bonds that the fund has bought.
In our next blog posts, you will find three major lessons we read in Index Investing for Dummies:
• Do not forget the Small Caps
• Geographical diversification
• Regular rebalancing to generate cash and increase returns
(See more investing books)