Where You Can Turn for a Helping Hand
Meet the Bogleheads, fans of the Vanguard founder and online friends to the small investor
(MONEY Magazine) – Trying to figure out the right thing to do with your money can be a daunting, lonely experience. Who do you talk to when you want to kick around an idea or get the answer to a perplexing question? You can consult an adviser and worry that he wants to sell you something. You can ask your brother-in-law ('nuff said). Or you can seek out multiple opinions via Internet message boards, where some loudmouth is apt to call you stupid or worse for asking your question and then "advise" you to "BUY GOOGLE AT $400." (No doubt he was yelling "BUY CISCO AT $100" in 1999.)
Instead, how about talking to a committed, knowledgeable disciple of Vanguard founder John Bogle, the index-fund pioneer who ranks among the small investor's best friends? Welcome to the Vanguard Diehards message board, the most active discussion group on fund site Morningstar.com, where hundreds of individual investors and a small coterie of professionals exchange advice every day. The Diehards, who have nicknamed themselves the Bogleheads, answer basic investing and financial planning questions, such as how to allocate your 401(k) or select a college savings plan. Yet their forum is also a place where experienced enthusiasts debate topics ranging from modern portfolio theory to the proper place for commodities in a portfolio.
And Now, the Book
The chief Boglehead is Taylor Larimore, 81, a former official at the Small Business Administration. After retirement, he was looking to do some volunteer work and had begun hanging out on Morningstar's message boards. "After a lifetime in finance," he says, "I figured the best way might be to answer financial questions for free." He and a few other Vanguard fans started the Diehards forum in 1998. Now Larimore and two other longtime Diehards--Mel Lindauer, 67, a retired owner of a graphic arts business, and Michael LeBoeuf, 63, a former management professor--have written The Bogleheads' Guide to Investing. Bogle penned the foreword.
The book's main themes should come as no surprise. In his own writing, Bogle emphasizes diversification, low costs and index funds; here, his followers try to make those notions graspable for beginners. "Most investment guides assume some prior knowledge," says Lindauer. "We're writing for those just starting out, and we have years of collective experience explaining the concepts." Also, unlike most investing authors, the Bogleheads offer advice on topics from taxes to insurance to estate planning.
The Wrong Question
Larimore says the No. 1 problem he and his colleagues tackle online--and have tried to address in their book--is that people start out asking the wrong question about an investment. They ask whether they should buy a particular fund, usually a top performer in a temporarily hot sector. "People don't seem to realize all the steps that need to come before you choose funds," adds LeBoeuf, "including making sure you are saving enough in the first place." Before investors are given fund recommendations, the Diehards ask for their financial goals, age and risk tolerance, along with a breakdown of where their money is now. The Diehards will then weigh in with suggestions for improving the asset allocation and recommend funds that could create the ideal mix.
Sometimes a question requires more esoteric knowledge. Recently an investor named Elaine asked how she should register ownership of I bonds--savings bonds that offer inflation protection--that she and her husband were buying for their daughter's college fund. Lindauer explained that no more than two people can be registered as I bond owners, and she and her husband should be listed. "If your daughter is listed as an owner or co-owner," he wrote, "the bonds won't qualify for the tax-free [college] benefit."
A Cult? Not Quite.
Given their obsession with Vanguard and its founder, you might think the Bogleheads are too cult-like for comfort. In fact, there's a lot of disagreement among them. A vocal minority argues that actively managed funds are a better investment than index funds. Some Diehards are true buy-and-hold practitioners; others adjust their portfolios based on what's going on in the market.
As in any online forum, feuds break out. But the chief Bogleheads' unflagging courtesy, and Morningstar's willingness to boot out troublemakers, has preserved the forum's community spirit. Four Diehard conventions have taken place (a fifth is in the works), and local chapters are springing up. The group has become like an extended family. In November, when Larimore was recovering from radiation treatment for cancer, more than 500 get-well messages were posted. Sometimes rough roads are easier to navigate when you've got a solid community to help you along the way.