Vanguard vs. the Matrix

Recently I've been reading the Vanguard forums (link1 and link2). The regulars there call themselves Bogleheads. A tribute to Vanguard founder Jack Bogle.

While much of the Internet is devoted to market timing and hot tips, a person will find none on that on planet Bogle-head. The language is different as is the attitude.

I was tempted to give this post the title, red pill or blue pill. The main character in the Matrix movie is given that choice. In the movie, the red pill leads to an escape from the Matrix. As a young person with their first decent job and some money to invest, you can take either pill. Let me randomly assign the red pill to Vanguard, this pill means you will likely be in the top 25% of U. S. investors in performance. However, what you give up is any excitement, action, and the possibility of a financial home run. With the prequisites of a high savings rate, frugal living, and a relative stable political environment (the U. S. still is on world maps) you will likely have a decent retirement.

Most people choose the blue pill, which means more excitement, more action, more frustration, and mostly lower performance. Yes, a tiny percentage will out do the other group. A tinier percentage will hit that home run (eg: loading the investment boat full of Apple, or Bershire, or Walmart at a good time in their curve).

I took the blue pill. Options might be described as the big blue pill with an exception for a few conservative strategies such as covered calls and collars. If you are reading this, you likely have chosen the blue pill. Well, I am can talk about the benefits of the red pill. It is what I suggest to young relatives that ask me about investments. Steady savings, no credit card debt, living under one's means, age appropriate asset allocation. Not many want to buy it, vs. if I had offered a hot penny stock tip. I certainly did not when I was 25. Still, for the average person that is interested in bottom line results, that doesn't want to spend a lot of time learning, or doesn't have the aptitude, the red pill, the Vanguard way, is the better way to go.