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šÆ The Book in 3 Sentences
š” Key Takeaways
- Stocks are good during inflation.
- Bonds are good during deflation.
- VBTLX for bonds.
- Go Bonds 5-10 years before retirement.
ā Top Quotes
Stop thinking about what your money can buy. Start thinking about what your money can earn.
Rule #1: Never lose money. Rule #2: Never forget rule #1.
Put all your eggs in one basket and forget about it.
š Summary + Notes
Part I: Orientation
- Avoid debt at all costs.
- A house mortgage is a debt. You donāt need a house most of the time.
- Spend less than you earnāinvest the surplusāavoid debt.
Part II: How to harness the worldās most powerful wealth-building tool
- Index is good, avoid fees, you canāt pick stocks, and donāt let others manage your money.
- Deflation occurs when the price of goods spirals downward and inflation occurs when they soar.
- Bonds: VBTLX (Vanguard Total Bond Market Index Fund). Bonds provide income, tend to smooth out the rough ride of stocks and serve as a sour deflation hedge.
- Bonds pay interest, providing us with an income flow.
- When you buy a stock you are buying part ownership in a company. When you buy bonds you are loaning money to a company or government agency.
- Since deflation occurs when the price of stuff falls, when the money youāve lent is paid back, it has more purchasing power.
- You are young. Be aggressive. Have 100% of your portfolio on VTSAX.
- You might start slowly shifting into your bond allocation 5 or 10 years before you are fully retired.
- ETF: VTI .05% (ETF=exchange traded fund). When buying or selling ETFs, just like a stock, commissions and/or spreads are frequently involved. These added costs can offset the savings in the expense ratio.