Mimi’s Reviews > The Simple Path to Wealth: Your Road Map to Financial Independence and a Rich, Free Life > Status Update

BONDS - STAGE 1
Bonds procide a deflation (prices go down) hedge.
Bonds provide interest = income.

Professional active management is measured against the Index. Index outlerforms active mgmt by 83% over a periode of 15 years.
Buying VTSAX probides you with top average return.
> high cost of regular investing comlared to index funds !
e.g. VTSAX is 0,04% Expense Ratio compared to 0,11% for the average index dund and 0,59% for the mutual funds.

Only 1% of the very top tier of money managers can outperform the market, & on the rare occasion they do, it is difficukt to distinguish whether it was due to skill or due to just being lucky.
> an index buys everything, so difficult to outperform
> to buy an index is to accept the market’s average return. Average = the combined performance of all the stocks in an index.

Index investing is for people who want the best possible results !!!
It is almost impossible to best & beat the market when investing in individual markets.
Buying all the stocks reliably in the market will outperform active professional management.

The vast majority of investors cannot just pick winning stocks selectively. It is difficult & expensive ! A dool’s errand.

THE 3 TOOLS
1. STOCKS (VTSAX = Vanguard Total Stock Index Fund)
Stocks provide the best return over time & serve as inflation hedge
2. BONDS (VTBLX = Vanguard Total Bond Market Index fund )Bonds provide income, serve as deflation hedge & smooth out the rough ride of stocks.
3. CASH: cash is required for emergencies & routine expenses. Cash is also king during deflation. The more prices drop, the more cash can buy

> safety is an illusion; there is no risk-free investment
> your stage is not necessarily linked to your age
> F-you money is critical: nothing money can buy is more important than your fiscal freedom.
> do not be 2 quick to think short term !!! We should be long-term investors.

3 CONSIDERATIONS:

1. In what stage of your investing life are you i.e. the wealth accumulation phase or the wealth preservation phase or a blend of both ?

2. What level of risk do you find acceptable ?

3. Is your investment horizon longterm or short term ?

KIS: CONSIDERATIONS & TOOLS
Keeping it simple is more profitable > the more domplex an investment is, the less likely it is to be profitable.

!!! Index funds outperform actively managed funds.
Why? The latter require expensive active managers. Their fees are a continuous drag on the portfolio. But they are veey profitable for the companies that run them.

During inflation, anything you want to buy tomorrow, will cost more than today. During deflation, delayed buying is rewarded. What you buy tomorrow, will cost less. Governments love small inflation: they can add money to the system, keep the economy up, it does erode the buying power of the currency, it allows debtors to pay their debts with dheaper currency.

2 disasters cn destroy economic wealth i.e.
Deflation and Hyper Inflation (inflation running out of control). For example in 1946, Hungary up to 46%

A little inflation can be positive for the economy: It allows for peices & wages to expnd, it lets the economy grow. It prevents a dooming deflation & depression.