A person saving for retirement who chooses low-cost investments instead of higher-cost ones could have a standard of living throughout retirement that’s more than 20 percent higher according to William Sharpe, professor emeritus of finance at Stanford Graduate School of Business.
During this article, he talks about his four pillars of investing:
1. Diversify to reduce risk in your portfolio.
2. Economize by investing in low-cost index type funds. A 1% difference between the cost of a passively managed index fund and an actively managed fund can make a profound difference in the value at retirement.
3. Personalize by avoiding investing heavily in the company where you work.
4. Contextualize by remembering the price of a security reflects the average opinion of investors about its future. You may think your opinion is superior, but it pays to be humble, investing in the market rather than trying to beat it.
To read the interview in its entirety go here.
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