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    Index Mutual Funds: How to Simplify Your Financial Life and Beat the Pros
    Index Mutual Funds: How to Simplify Your Financial Life and Beat the Pros
    Index Mutual Funds: How to Simplify Your Financial Life and Beat the Pros
    Ebook126 pages1 hour

    Index Mutual Funds: How to Simplify Your Financial Life and Beat the Pros

    By Dale Maley

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    About this ebook

    This book is designed to teach you the basics of index fund investing in less than one hour of reading time. It covers the basics of index fund investing. Although it was published in 1999, it was designed to be timeless and still applies to the 21st Century.

    LanguageEnglish
    PublisherDale Maley
    Release dateJul 11, 2010
    ISBN9781452328799
    Index Mutual Funds: How to Simplify Your Financial Life and Beat the Pros
    Author

    Dale Maley

    Dale C. Maley is the author of the 19999 book Index Mutual Funds: How to Simplify Your Financial Life and Beat the Pros.He is also a contributing author to Chapter 18 Seeking Help from Professionals in the 2009 book The Bogleheads Guide to Retirement Planning.He is a very successful private investor who has been a student of Financial Planning and Investing for over 30 years. He was trained as an engineer at the University of Illinois and has been a practicing engineer for 32 years. His accomplishments as an engineer include the granting of 16 U.S. Patents and authorship of over 500 professional technical papers. He is also a member of the International Society of Automotive Engineers and the Society of Manufacturing Engineers.He also has earned an MBA (Masters Degree in Business Administration) degree from Illinois State University. His background in mathematics, engineering, and business provides him with the excellent basis for understanding and teaching investments and financial planning.He is also a very successful investor who has been investing in common stocks and mutual funds since 1980. He has also personally invested in both 401(K) and IRA plans, so he is familiar with participation and management of these types of investments. He has been investing in indexed common stock mutual funds since 1990.Dale became a Registered Financial Advisor in the State of Illinois in 2006 and is currently launching his business as a fee-only financial planner. He is President of Maley Financial Planning LLC.

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      Book preview

      Index Mutual Funds - Dale Maley

      Index Mutual Funds: How to Simplify Your Financial Life and Beat the Pros

      by

      Dale C. Maley

      SMASHWORDS EDITION

      PUBLISHED BY:

      Artephius Publishing on Smashwords

      Index Mutual Funds: How to Simplify Your Financial Life and Beat the Pros

      Copyright © 1999 by Dale C. Maley

      All rights reserved. Without limiting the rights under copyright reserved above, no part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form, or by any means (electronic, mechanical, photocopying, recording, or otherwise) without the prior written permission of both the copyright owner and the above publisher of this book.

      Table of Contents

      Chapter 1

      Mutual Fund Shock

      Chapter 2

      Why Are There Over 8,000 Mutual Funds to Choose From?

      Bull Market in Stocks

      Global Competition and 401(K)'s

      Anticipated Demise of the Social Security System

      Baby Boomers

      Lack of Investor Knowledge

      Low Barriers to Entry

      Future of Mutual Funds

      Chapter 3

      Basics of Mutual Funds

      Best Type of Investment Asset

      Are Common Stocks Too Risky

      Diversification

      A Professionally Managed Mutual Fund is Born

      Continued Popularity of Mutual Funds

      Chapter 4

      Mutual Fund Performance

      How To Know Your Mutual Fund is the Best

      Fund Comparisons

      Chapter 5

      Index Funds

      Mutual Funds not Consistent

      Fund Performance

      Cost Disadvantage

      Efficient Market Theory

      Monkeys and Dart Boards

      Wilshire 5,000 and S&P 500 Studies

      An Index Fund is Born

      Indexing Grows

      The Beardstown Ladies Controversy

      Chapter 6

      Index Fund Explosion

      Malkiel's Book

      Bogle's Influence

      Personal Finance Magazines

      The Internet

      Chapter 7

      Why Haven’t Index Funds Taken Over

      Indexed Stock Funds Not Available until 1976

      Lack of Education About Investing

      No Financial Incentives to Sell Indexed Stock Funds

      Mutual Fund Companies

      Indexed Stock Funds Not Available to 401(K) Investors

      Indexing Not Exciting Enough

      Indexing Concept Hard to Believe

      Glorification of Professional Mutual Fund Managers

      Bull Market

      Just Settling for Average Results

      No Publicity from Personal Finance Magazines 

      Chapter 8

      Global Indexing

      Global Markets

      Overseas Investment Opportunities

      A Foreign Index Fund is Born

      Closing Thoughts

      Chapter 9

      Available Index Funds

      Chart of Available Index Funds  

      Chapter 10

      Selecting Common Stock Index Funds

      U.S. Common Stock Index Funds

      Foreign Common Stock Index Funds

      Japan

      Cost Considerations

      Other Considerations

      Chapter 11

      Indexing Into Retirement

      Getting Ready for Retirement

      Retirement Strategy

      Asset Allocation

      Asset Allocation and Investor's Age

      Using Indexing to Implement Asset Allocation

      Chapter 12

      Still Think Your Gunslinger Can Beat the Market

      Have You Compared the Professional's Performance to the Market's Averages?

      The Professional Manager Faces a Heavy Cost Disadvantage

      The Professional Manager Faces Tax Disadvantages Also

      Very Few Professionals Have Consistently Beaten the Markets

      Going Against the Advice of the Number One Personal Finance Magazine

      Compromise Strategy

      Chapter 13

      Activity Checklist

      Chapter 14

      Summary

      Appendix

      John Bogle Speech on Birth of First Index Fund

      Money Magazine Editorial Acknowledging Importance of Index Funds

      Compound Interest Formula

      Other Investment Resources

      Glossary

      Acknowledgment

      I have not attempted to cite in the text all the authorities and sources that were consulted for preparation of this book. To do so would require more space than is available. The list would include departments of the Federal Government, libraries, institutions, and many periodicals.

      Every effort has been made to trace, contact, and obtain permission from copyright holders for any copyrighted materials used in this book.  However, in some instances, this has proved to be impossible.  If notified, the publisher will be pleased to rectify any omissions in the next edition of this book.

      Many friends helped review and improve the book. I would particularly like to thank Don Harris, Whiteford Mauldin, Chuck Twiggs, Wes James, and Jim Munz for their help and support.

      I would like to thank Professor William Scott of the Illinois State University College of Business. I learned a great deal from Professor Scott s classes on investment and finance. Through a term paper in Professor Scott's class, I was able to first learn about the advantages of indexing compared to professional portfolio management.

      Many thanks also go to Matthew Roberts, President of Index Funds Online.  Matthew provided support and inspiration for completing this book.

      I would also like to thank my wife Connie for her understanding and support in writing this book.

      Warning-Disclaimer

      This book is designed to provide information in regard to the subject matter covered. It is sold with the understanding that the publisher and author are not engaged in rendering legal, accounting or other professional services. If legal or other expert assistance is required, the services of a competent professional should be sought.

      It is not the purpose of this manual to reprint all the information that is otherwise available to the author and/or publisher, but to complement, amplify, and supplement other texts. You are urged to read all the available material, learn as much as possible about investing and to tailor the information to your individual needs. For more information, see the many references in the Appendix.

      Investing is not a get-rich-scheme. Anyone who decides to invest must expect to contribute a lot of time and effort.

      Every effort has been made to make this book as complete and as accurate as possible. However, there may be mistakes both typographical and in content. Therefore, this text should be used only as a general guide and not as the ultimate of investing information. Furthermore, this book contains information on investing only up to the printing date.

      The purpose of this book is to educate and entertain. The author and Artephius Publishing shall have neither liability nor responsibility to any person or entity with respect to any loss or damage caused, or alleged to be caused, directly or indirectly by the information contained in this book.

      Chapter 1

      _________________________________________________________

      Mutual Fund Shock

      Many people only buy a new car every five or ten years. When these people walk onto the car dealer's lot after being out of the new car market for many years, they are shocked by how much the cost of new cars has increased!

      This same type of shock is experienced by new mutual fund investors. A new mutual fund investor will often decide to investigate mutual fund investment by turning to the financial section of a newspaper. The new mutual fund investor is shocked to discover there are over 8,000 different mutual funds to choose from!!  The new mutual fund investor is often completely overwhelmed about how to begin to choose from 8,000 different mutual funds.

      A new investor often only has enough money to invest in one mutual fund. Once new investors learn they must pick only one mutual fund out of more than 8,000 funds, they quickly start to feel like players in a Russian roulette game!!

      This book will help new investors make sense of the mutual fund industry. New investors will learn why there are so many mutual funds available. This book will also explain the basics of mutual funds and common stock index mutual funds. The new investor will learn how to avoid having to sort through 8,000+ mutual funds by using a few common stock index funds to achieve their financial goals.

      If you already invest in mutual funds, this book will show you how to beat 80% of the funds every year by using common stock indexed funds. You will learn how to evaluate the performance of your professionally managed mutual fund. You will learn how to determine if your professional mutual fund manager is really doing a good job with your investments.

      The following chapter will simplify your financial life and let

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