Investment Wisdom From the ‘King of the Bogleheads’


Larimore’s philosophies — investing and life

Larimore told me the keys to financial independence are to live below your means, save regularly, keep costs and taxes low, avoid large mistakes, keep things simple and stay the course. Larimore said the three biggest mistakes people make are: 

  1. Gambling in individual stocks. 
  2. Using past performance to predict future performance. 
  3. Building complex, high-cost and tax-inefficient portfolios.

Indeed, Larimore’s most recent book, The Bogleheads’ Guide to the Three-Fund Portfolios, shows how a simple portfolio of three total market index funds outperforms most investors with less risk.   

The three-fund portfolio is simply:

  • A total U.S. stock index fund
  • A total international stock index fund
  • A total bond market index fund

“Total,” in this case, means owning large, midsized and small company stocks. The S&P 500, for example, is a large-company stock index of 500 companies. A total stock U.S. market index is a broad-based index of U.S. stocks, big, midsized and small, including more than 4,000 company stocks. 

Larimore said that the main values of total market index funds are their low costs, low taxes, great diversification and simplicity. With just those three funds, adjusted to your desired mix of stocks and bonds that suit your goals and your appetite for risk, you can own virtually every publicly held company on the planet and the vast majority of U.S. investment-grade bonds. As part of his never-ending desire to give back, Larimore has donated 100 percent of his royalties to the John C. Bogle Center for Financial Literacy (I am a past board member).  

I asked Larimore the single most important piece of advice he had for seniors and he said, “Keep what you’ve got.” This means don’t take unnecessary risks. If you lose 25 percent of your portfolio, you’ll need to earn about 33 percent just to get back even. 

It’s more than money

Even more than his financial philosophies, what I admire most about Larimore are his views on life. He told me he thought his key to longevity and vitality could be that he seldom worries. “I was a young paratrooper in World War II where I saw the horrors of war,” he said. “After the war, I flew around the world, visiting many poor countries where I saw terrible poverty. These two events made me very grateful to be an American from a loving family. Compared to others, I realize, deep down, that I am foolish to worry about myself.”

I think I’m going to focus on his life lesson and worry less about the small stuff; it has certainly worked for Larimore. As Morningstar’s Christine Benz told me, “Taylor is an inspiration in how to live well.” I couldn’t agree more.

Unsurprisingly, Larimore has no shortage of admirers. I was honored to be one of more than 100 people from across the country and world who attended his 98th virtual birthday party, organized by the South Florida and Tampa Bay Bogleheads chapter coordinators. For roughly 90 minutes, we gave our tributes to this great man and shared what we learned from him. In my tribute, I thanked him for helping so many people achieve their financial freedom. 

If you would like to learn more about Larimore and the wisdom he has offered over the years, you can go to Bogleheads.org and check out the more than 55,000 posts he has contributed. If you want some information on a specific topic on investing or personal finance from people not trying to sell you anything, simply type the subject into the search engine. With 116,000-plus members who have made more than 6.4 million posts on over 334,000 topics, the odds are good that there will be something for you. And you do not have to be a member to read these posts.

Thank you to all of the volunteers for the community they’ve created and the countless hours they’ve given to help people across the world achieve their financial freedom. And thank you, Taylor, for all you have done and continue to do. We look forward to your 99th birthday party and many more. 

https://www.aarp.org/money/investing/info-2022/3-fund-wisdom-of-taylor-larimore.html

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