How to Become Rich Through Index Investing
A proven, low-cost approach to building wealth based on "The Little Book of Common Sense Investing" by John C. Bogle
Explore the PrinciplesMarket Returns
Capture the full return of the stock market without trying to beat it
Low Costs
Keep more of your money with minimal fees and expenses
Time-Tested
A strategy that has outperformed most professional investors
Phase 1: The Foundation
The Market Always Wins
Principle 1Over time, the stock market's return is simply the sum of all business earnings growth plus dividends. Trying to beat the market is a zero-sum game before costs and a loser's game after costs.
Costs Matter
Principle 2Every dollar paid in fees, expenses, and transaction costs is a dollar less in your pocket. High costs are the primary reason most actively managed funds underperform the market.
Phase 2: The Strategy
Buy the Haystack
Principle 3Instead of trying to pick winning stocks or funds (the needles), buy the entire market (the haystack) through a low-cost index fund. This guarantees you'll earn the market's return.
Focus on Total Market
Principle 4A total stock market index fund is the simplest, most efficient way to own American business. It's broadly diversified, low-cost, and requires no maintenance.
Phase 3: The Execution
Start Early
Principle 5Begin investing as soon as possible. Time magnifies the power of compounding returns. $10,000 invested at age 25 could grow to over $300,000 by age 65 at 7% annual return.
Invest Regularly
Principle 6Set up automatic contributions to your index fund(s). Dollar-cost averaging smooths out market volatility and builds wealth steadily over time.
Phase 4: The Behavior
Stay the Course
Principle 7Ignore market fluctuations and media noise. The stock market has always recovered from declines and gone on to new highs. Time in the market beats timing the market.
Avoid Performance Chasing
Principle 8Past performance does not predict future results. Funds that outperform eventually revert to the mean. Stick with your index fund through all market conditions.
Phase 5: The Results
Reinvest Dividends
Principle 9Dividends have accounted for about 40% of the stock market's total return since 1926. Automatically reinvesting dividends supercharges your compounding returns.
Achieve Financial Freedom
Principle 10By consistently investing in low-cost index funds over decades, you'll likely accumulate substantial wealth. The magic of compounding does the heavy lifting.
See the Power of Index Investing
Projected Results
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Frequently Asked Questions
An index fund is a type of mutual fund or ETF designed to track the performance of a specific market index, such as the S&P 500 or the total stock market. Instead of trying to pick winning stocks, index funds aim to match the market's performance at very low cost.
Index funds outperform most actively managed funds primarily because of lower costs (no high manager fees or frequent trading expenses) and because most active managers fail to consistently beat the market over long periods after accounting for fees.
A common recommendation is to invest 15-20% of your income, but the exact amount depends on your financial goals, age, and other factors. The key is to invest consistently over time, even if you start with small amounts.
1. Open an account with a low-cost provider like Vanguard, Fidelity, or Schwab
2. Choose a broad market index fund (like a total stock market or S&P 500 fund)
3. Set up automatic contributions
4. Stay invested through market ups and downs