My Comments: I’ve long followed Dr. Dahle and remarked on his expertise with respect to investing money for retirement. His specialty is advice for fellow White Coat professionals but his ideas should resonate with anyone working to accumulate funds to finance one’s life when their work life ends.

What follows here is his introduction to his list of 10 benefits to be derived from using index funds to grow your money. It’s long, detailed and very interesting.

However, if you are past the working stage of life, it won’t mean as much as it does for someone in their 40’s and 50’s. If that describes you, I encourage you to click on the link just below and fully explore the 10 benefits he describes. You’ll be glad you did.  (I’m in my 80’s and it’s helpful to me.)

By Dr. Jim Dahle / 11 JUN 2024 / https://tinyurl.com/yx26cdnh

Index funds (both the traditional mutual fund version and the exchange traded fund (ETF) version) are profitable, but only for those who own them. Not necessarily for those who sell them or provide them. The largest traditional index mutual fund provider, Vanguard, is run at cost. Schwab and Fidelity compete with them, but many suspect these two companies use their index funds as loss leaders for other products. State Street (SPDRs) and BlackRock (iShares), along with Vanguard and Schwab, lead this space for the ETF versions. Although these funds are often monstrous and profits “can be made up on volume,” I’m skeptical that there is much profit there given that the expense ratios are so similar to what Vanguard is charging.

The bottom line is that there is very little incentive to do a lot of advertising and other marketing for these products. Vanguard advertises, but it’s usually portfolio management services—not the index funds themselves—that are being marketed.

This lack of marketing can sometimes cause investors to not be as aware as they should be of the benefits of index fund investing. Eighty-five percent of our portfolio is invested in index and index-like mutual funds. Some of our favorites include:

• Vanguard Total Stock Market Index Fund
• Vanguard Total International Stock Market Index Fund
• Vanguard Small Value Index Fund
• Vanguard FTSE All-World Ex-US Small Cap Fund
• All of the TSP Funds
• Fidelity Zero Total Market Index Fund
• Schwab US TIPS ETF
• Vanguard Intermediate Term Tax Exempt Fund

This is hardly an exhaustive list of top-notch index and index-like investments. There are many other excellent, low-cost, broadly diversified index funds out there.

All of the above funds have low expenses and enjoy low turnover, and they are very passively run. You know what you’re getting when you buy it (it’s usually in the name), and that will be exactly what is still in it a decade later when you check in on it. In the long run, the performance will beat most, but not all, of the actively managed peers for a given fund, especially after-tax. There are at least 10 unsung benefits of index funds, and today’s post will discuss them.

(Here’s where you click on the link following his name above and find what he’s talking about. TonyK)