Advice from the index-fund mastermind
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Simplicity is key
What is the most important piece of advice you have for someone who is new to investing?

Don't-miss insights:

• History of the index fund • Simplicity is key • Switching to indexing • Costs add up • How much to pay • Bogle's portfolio • Money market investing • ETFs vs. index funds • Investing for everyone

Rely on simplicity; own American or global business in broadly diversified, low-cost funds.

Do you think the average person could safely invest for retirement and other goals without expert advice -- just by indexing?

Yes, there is a rule of thumb I add to that. You should start out heavily invested in equities. Hold some bond index funds as well as stock index funds. By the time you get closer to retirement or into your retirement, you should have a significant position in bond index funds as well as stock index funds. As we get older, we have less time to recoup. We have more money to protect and our nervousness increases with age. We get a little bit worried about that nest egg when it's large and we have little time to recoup it, so we pay too much attention to the fluctuations in the market, which in the long run mean nothing.

Switching to indexing
Should people who do not currently hold index funds sell their actively managed funds and move the money to index funds, or should they hold those and start investing their new money in index funds?

A lot depends on the kinds of funds they own. We've got an industry that makes life very complicated for investors because we've got dozens of different types of funds, different investment styles, different market capitalizations, specialty funds that are in telecommunications, gold, technology or whatever it may be, and a whole variety of international funds, including some that invest in just a single country. The more concentrated those investments are, say, in a single country or a single industry, I'd say the answer is generally yes, move to an index fund -- but watch out for taxes. If the funds are in your retirement plan, you can ignore taxes, but if they're in your own account, you want to take into account the tax cost involved.

Another factor to consider is how much it's costing you. The record is very clear: High-cost funds do considerably worse than low-cost funds. How could it be otherwise?

Think about diversification when you're deciding what to do, and think about cost.