پیش گفتار

FOREWORD

John C. Bogle, founder of Vanguard, which has more than $3 trillion in assets under management

As 2016 began, I started my Saturday morning reading the New York Times while eating breakfast. After scanning the front page (and pulling out the crossword puzzle for later), I turned my attention to the business section. Displayed prominently at the top of section B1 was Ron Lieber’s Your Money column, which featured essential money management strategies written on index cards by six personal finance experts.

Ron’s point was to show that effective money management does not need to be complicated, with the key points of managing your money fitting on a single index card. Five out of the six index cards addressed the topic of how to invest your savings, and each gave the same simple advice: invest in index funds.

That message is getting through to investors. In 1975 I created the world’s first index mutual fund, and I’ve been singing its praises ever since. In those early days, I was a lone voice without much of an audience. Today an enormous choir has developed to help me spread the word. Investors are hearing our voices loud and clear, and are voting with their feet—in other words, their dollars.

Since the end of 2007, mutual fund investors have added almost $1.65 trillion to their holdings of equity index funds while reducing their holdings of actively managed mutual funds by $750 billion. That swing of $2.4 trillion in investor preferences over the last nine years is, I believe, unprecedented in the history of the mutual fund industry.

Over the past seven years, Tony Robbins has been on a mission to help the average investor win the game, preach the message of index funds, and tell investors to stop overpaying for underperformance. In his journey, he has spoken to some of the greatest minds in finance. Although I’m not sure I belong in that category, Tony came to my office at Vanguard to get my thoughts on investing. Let me tell you, Tony is a force of nature! After spending just a few minutes with Tony, I completely understand how he’s been able to inspire millions of people all over the world.

We had such a great time speaking with each other that our scheduled 45-minute interview ended up lasting four hours. It was one of the most wide-ranging and probing interviews I’ve done in my 65-year career in the mutual fund industry. Tony’s energy and passion are contagious and energizing; I knew right away his book would have a huge impact on investors.

But even I underestimated just how big an impact Tony would have. His first book on investing, Money: Master the Game, has sold over one million copies and spent seven months at the top of the New York Times Business Best Sellers list. Now he returns with Unshakeable, which is sure to add even more value to readers. Unshakeable presents insights from some of the most important figures in the investing world, such as Warren Buffett and Yale endowment fund manager David Swensen. Both Warren and David have said time and again that index funds are the best way for investors to maximize their chances of investment success. This book will help that message reach even more investors.

Index funds are simple. Rather than try to time the market or outguess other professional money managers about the prospects of individual stocks, index funds simply buy and hold all of the stocks in a broad market index such as the S&P 500. Index funds work by paring the costs of investing to the bare-bones minimum. They pay no fees to expensive money managers and have minimal trading costs, as they follow the ultimate buy-and-hold strategy. We can’t control what the markets will do, but we can control how much we pay for our investments. Index funds allow you to invest, at minimal cost, in a portfolio diversified to the nth degree.

Think about it this way: all investors as a group own the market and therefore share the market’s gross return (before costs). By simply owning the entire market, index funds also earn the market’s return at minimal annual cost: as low as 0.05% of the amount you invest. The rest of the market is active, with investors and money managers furiously trading back and forth with one another, trying to outperform the market. Yet they too, as a group, own the entire market and earn the market’s gross return. All of that trading is enormously expensive. The fund managers demand (and receive) huge fees, while Wall Street takes a cut from all that frenzied trading. These and other hidden fees can easily add up to over 2% each year.

So index fund investors receive the gross market return minus fees as low as 0.05% or less, while active investors as a group will receive the same gross return minus 2% or more. The gross return of the market minus the cost of investing equals the net return to investors. This “cost matters hypothesis” is all you need to know to understand the benefits of index investing. Over an investment lifetime, this annual difference really adds up. Most young people just starting their careers will be investing for 60 years or more. Compounded over that time frame, the high costs of investing can confiscate an astounding 70% of your lifetime returns!

This cost differential substantially understates the costs incurred by so many investors—especially investors in 403(b) and 401(k) retirement plans. As Tony points out in chapter 3, this extra layer of fees (often largely hidden) confiscates an additional staggering proportion of the returns delivered by your funds.

I’m excited to add my small contribution to this book and support Tony in being a voice for good. I’m thrilled to have spent a wonderful afternoon conversing with him. I’m humbled to have the opportunity to spread the gospel of indexing, to help the honest-to-God, down-to-earth human beings who are saving for a secure retirement or for their children’s education.

With flair and depth, Tony covers the history of investment risks and returns, and successful investors should understand this history. That said, history, as the British poet Samuel Taylor Coleridge wrote, is but “a lantern on the stern, which shines only on the waves behind us,” and not on where we are headed. The past is not necessarily prologue to the future.

We live in an uncertain world, and face not only the risks of the known unknowns but also the unknown unknowns: the ones that “we don’t know we don’t know.” Despite these risks, if we are to have any chance for meeting our long-term financial goals, invest we must. Otherwise we’re certain to fall short. But we don’t have to put up 100% of the capital and take 100% of the risk only to receive 30% of the reward (often far less). By buying low-cost, broad-market index funds (and holding them “forever”), you can guarantee that you will receive your fair share of whatever returns the financial markets provide over the long term.