Friday 4 January 2019

(Post 74/week 55)Learning investing/trading together part 12: Boglehead investment philosophy

This post serves as a summary of the Boglehead investment philosophy, which I believe is a good and easy to understand investment strategy, that an amateur like you and me can follow

Please refer to this link to learn more about boglehead investment philosophy

What is a Boglehead investment philosophy?
  • Boglehead investment philosophy simply follows a small number of simple investment principles that have been shown over time to produce risk-adjusted returns far greater than those achieved by the average investor.
  • The basis of all of these principles is the idea that successful investing is not a complicated process, and can be accomplished by anyone with a small amount of effort.
  • These ideas come from the investing philosophy of Vanguard-founder Jack Bogle, hence it is called the Boglehead investment philosophy
1.Develop a workable plan
  • The Bogleheads approach to developing a workable financial plan is to establish a sound financial lifestyle.
  • To summarise, live below your financial mean and avoid bad debt
2.Invest early and often
  • Establish a regular saving pattern, minimum about 20% of your income should be enough
  • Arrange automatic saving deduction for your bank account, if you are forgetful like me, like in my case with posb invest saver
  • The graph below is a great example of why you should start saving early

3. Never bear too much or too little risk
  • You need to be honest with yourself on how much risk you would like to take if the stock drop will you be able to sit through it without thinking about it all day? (I been through that and it wasn't a pleasant experience haha)
  • In summary, you can either follow shinything advice on having 110-your age in stock(e.g my age is 22 this year, hence 110-22=88% in stock and 100-88%=12% in bonds) You can read more about shinything thread here
  • Or, you can simply follow benjamin graham, father of value investing advice of simply either putting 25 % in bond or 75 % in stock or the other way around
  • Rather than picking individual stocks,Bogleheads buy funds that are widely diversified or even approximate the whole market.
  • This guarantees they will receive the average return of all investors. Being average sounds bad, but it is actually a great thing. That's because most investors perform worse than average after taking into account the high fee that they can pay for actively managed funds.
5. Never try to time the market
  • Simply put, don't try to time the market unless you are a trader and have a very good plan
6. Use index fund when possible
  • The best and lowest cost way to buy the whole stock market is with index funds (either through traditional mutual funds or ETFs)
  • One of such ETFs is our STI ETF (ES3 or G3B) OR Vanguard Total Stock Market Fund Which is the largest mutual fund in the world
7. Keep costs low
  • Choose the index fund with the cheapest fees
  • Refer to my post on how to choose a brokerage here
8.Minimize taxes
  • There is no capital gain tax or dividend tax for Singapore stock(that's the only great part about buying stocks in Singapore)
  • However, there is 30% dividend withholding tax for buying US stock if you're a Singaporean, for more information for dividend withholding tax please refer to my post on shiny thing thread here
9. Invest with simplicity
  • The boglehead investment philosophy is simply following a 3 fund portfolio, a local stock market index fund ETF(Which in my case is the STI ETF: ES3 or G3B), a local stock market bond index fund ETF(Singapore bond index fund: A35) and an international bond index fund(Vanguard ETF)
  • For more information about the STI ETF: ES3 or Singapore bond index fund: A35, please refer to this post here
  • I do not own any international ETF as I do not have the capital yet(still working on it) 
  • The picture below shows an example of a 3 fund portfolio

10. Stay on course
  • Do not panic when the stocks prices drop
  • Do not be distracted by other funds that are performing better, in short, only invest within your circle of  competence as Warren Buffett put it
  • Simply put,boglehead should  (1) save a lot, (2) select an asset allocation containing both stock and bond asset classes, (3) buy low cost, widely diversified funds, (4) allocate funds tax-efficiently, and (5) stay the course.
  • One of the wonderful things about Boglehead investing is that it generally only requires a part of a day to set up, and then about an hour a year of effort to rebalance. Beyond that, there is no need to watch the markets or follow financial news. Even better, it works. Although Bogleheads investing may seem strangely simple, it is based on decades of comprehensive research showing that buying and holding the whole market consistently outperforms many of the alternatives.
  • To understand more about rebalance,do refer to this post on the shiny thing thread here
Remember to DYODD(Do your own due diligence!)


  1. Your blog is too informative. Keep sharing your post in future too.I think people should acquire a lot from this weblog its really user pleasant. So much great information on here.
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  2. Thanks for sharing this philosophy with us. Much needed for any trader today. Wish we could follow these tips seriously. Such tips can really help in achieving trading objectives.