Index Funds: Top Tips From The Best Interest

Index Funds

Index funds are revolutionizing the investment industry. Actually there’s a chance they already have. Why? Their low-cost fee structure mixed with their incredible ability to capture market returns means investors get more. Your interest as the investor is put first through simplicity.

So whether you’re young and just starting to save for retirement, or you’ve been investing for decades, a low cost index fund portfolio is your best bet. Index funds or ETFs should form the base of your investment portfolio. Start with these.

One of the Best PF Bloggers Invests this Way Too

Since I started blogging, just over a year ago, I soon crossed paths with Jesse Cramer. His website, The Best Interest is top shelf. He is one of the premiere blogging products online and I model much of my content and approach after him.

So you can imagine how excited I was to collaborate with him this week when he agreed. Jesse, you’re the best!

He has over 300k page views, written over 1200 pages of content, interviewed over 20 personal finance enthusiasts, and pens articles for other personal finance professionals for a fee. His weekly newsletter is read by over 1750 people.

What’s more, he’s a freaking genius. The article below you are about to read was written on a plane while flying to #FinCon21 in Austin Texas. You know how times I had to edit and change his copy? Just once, and it was for format! This guy is smart, analytical, and he is a very gifted writer.

Don’t just take my word for it, his writing has been featured on CNBC, MSN, and the Motley Fool.

He also invests in Index Funds.

What makes him even better is that he fosters dogs with his girlfriend. I can’t say enough good things about this guy, so I’ll stop here and let him take the stage.

Jesse, welcome.

Hey Jesse, tell us a bit about yourself

Thanks for the opportunity to write here, Stephen!

My name is Jesse Cramer. I live in Rochester, NY with my girlfriend and our dog.

I write and talk about money. A lot. It’s my passion. Specifically, I run a blog — called The Best Interest — and an accompanying podcast — The Best Interest Podcast —where I discuss my own thoughts and interview other experts. The blog has attracted over 300K readers in three years, and the podcast is about to pass 10K downloads after 6 months. This project has been a ton of fun and has opened up so many interesting doors, both personally and professionally.

Tell us about your passion for fostering dogs

Haha – sure thing. Not money-related, but let’s be honest…dogs are more fun!

We started fostering in May 2020. I won’t tell you about each of the 17 dogs who have come through, but I’ve got to tell you about Mama.

Mama was the first dog we got. She was an Aussie Cattle Dog mix from Houston, Texas. Usually, Aussies (also called Heelers, i.e. “Blue Heelers”) are 40-45 pound dogs, but Mama came to us at only 27 pounds. She was dramatically underfed, and her fur showed nutrient deficiency. She’d clearly been nursing puppies. So yes – she was starving because she was giving all her available nutrients to her pups! Poor girl. Attitude-wise, she was the sweetest dog.

Fast forward 24 hours, and we got told that “Mama” came to Rochester with her three puppies, who were each at separate fosters. But those separate fosters all quickly realized that the pups were too young to be away from their mom—they should still be nursing! We had to reunite the family! We had to give up Mama…

Or did we?!

Kelly told the foster service that we would take all the puppies!!! One day into our first foster experience and we decided to take in Mama and her three kids. That’s one way to learn how to be a foster.

Mama did great and the puppies grew. The puppies stopped nursing after a few weeks and found forever homes. Meanwhile, Mama had put on 10+ pounds and was starting to look like a normal dog again.

And that’s not all! Since she never responded to the name “Mama,” we decided to try out a list of “100 Most Popular Dog Names.” Would she respond to “Luna!” or “Honey!” After exhausting 98% of the list with zero response, we were ready to give up. But then Kelly and I both had a shock when Mama turned on a dime at the name, “Sadie!” We tried a few more names. Nothing. No response. Then we tried “Sadie!” again…and she stopped, looked up, and trotted over to us. Mama became Sadie!

Fit is Everything

Sadie had a few adoption applications, but nobody seemed like the right fit. And the more time she spent with us, the more we both realized: this is a special dog, and we have a special connection with her. How could we possibly let someone else adopt her?

So we become “foster failures” on our very first try. We adopted Sadie. And ever since then, we’ve had 13 more dogs of all ages come through the house. Most recent was Tess, a beautiful Rhodesian Ridgeback mix who loved playing fetch. Sadie is doing great, and she acts like a great friend, mentor, or adoptive parent to all the fosters we bring in.

Image Caption: Jesse, Sadie and Tess

Tell us about what got you into personal finance

Ok, back to the main event – money!

I went through the standard 20-something American, middle-class story. Graduated college with a pile of debt, a bunch of new bills, a bunch of fun things I could spend money on, and the first real paycheck of my life.

“Now what?!” I wondered. How do I balance these debts, these bills, and these desires? How do I have fun while not messing up my future? Right then at age 22, I started my first ever budget (it wasn’t great) and started investing 10% of my meager salary into a Target Date fund in my 401(k).

The vital point is that I started! Suddenly, I had skin in the game. Having a few thousand dollars in the market made me want to learn more. Being able to see my spending each month made me want to be a better budgeter. I was motivated by the fact that I had money on the line.

I’ll talk about how The Best Interest plays into all of this later. But since age 22, I’ve loved reading about personal finance, learning new money ideas, talking to people (friends, family, coworkers, etc) about money. I especially love popping the hood (like an engineer) to figure out how all these systems really work. So what started as an interest in personal finance has evolved into an interest in investing, capital allocation, economics, public policy, and more.

Summarize your first few years of investing

At heart, I am an index fund investor. One of the first books I read was A Random Walk Down Wall Street, and it has had a lasting influence on me. In short, this book is a mathematical basis for why index fund investing is so smart.

As I mentioned earlier, my first investing foray was putting 10% of my salary into a Target Date Fund via a 401(k) account.

Then I went back to grad school. No investing for that 18 months, too poor! But I kept reading about investing.

As my salary has slowly increased over the years, I’ve gotten to the point where I maximize my 401(k), Roth IRA, Health Savings Account, and throw a little leftover into a taxable brokerage. I budget money for material items that I enjoy, save where I can, and dump those saved dollars into investment accounts.

Ok – but what do I invest in?

98% of my investable money is in plain index funds. Mostly in U.S. stocks, supplemented with a lesser fraction of international stocks and an even smaller fraction of bonds. It’s a lazy portfolio.

The other 2% of my portfolio is in Bitcoin and Ethereum. Exciting! Exotic! Maybe it’ll change the world, maybe it’ll go to zero. Either way, it has a small impact on my overall portfolio value.

Image Caption: Burton Malkiel the author of A Random Walk Down Wall Street

Tell us about you investment results

I’m a boring investor! But still, I’ve had money in the U.S. stock market since 2012. And that money has returned roughly 240% after accounting for inflation.

Not too shabby.

What got you to begin “The Best Interest”

As I mentioned earlier, I’ve realized over the years that I love to learn, talk, and teach concepts dealing with money. And I have tons of conversations with friends, family, and coworkers about these topics. I’d often follow up on those conversations with helpful emails. A few people encouraged me to polish and publish those emails online…and The Best Interest was born!

There are now over 1200 written pages of content on the blog. The podcast is approaching 40 episodes, 20 of them being 1-on-1 interviews with money experts.
I send out a weekly newsletter with new content each week. As of this writing, over 1750 people read that newsletter each week.

In addition, I have a few private clients (e.g. professional financial advisors) for whom I write. I even created a newsletter service for financial advisors’ clients. I write, and advisors get to send it to their clients and look smart in the process. Win-win.

Any highlight lessons or interviews?

Some of the biggest lessons from the podcast have been “meta” lessons. Lessons for me as a podcaster. How to ask good questions, how to listen and take notes, when to interrupt and when not to. That kind of stuff.

But as far as money/entrepreneurship/investing lessons go, a few that come to mind:

5AM Joel talked about how “doing the right thing for the wrong reason” can often backfire on us because our conviction isn’t there. Let’s apply that idea to investing. If you invest for the wrong reasons (e.g. not based on some fundamental belief), then the first sign of resistance will likely scare you into selling. Even if your investment choice was great, your poor reasoning will lead you to failure.
FI Squirrel talked about how having skin in the game is so important. He offers some coaching services for free but often finds that his free clients don’t improve much because they have no skin in the game. Paying for a service can be just as important for the client as it is for the service company because it motivates the client to maximize the dollars they’re spending.
Purple mentioned how “laziness does not exist,” and I think that’s a great thing to remember in today’s productivity-addicted world.
Finally, I have fond impressions of Fiona (the Millenial Money Woman) and Brennan (a.k.a. “BudgetDog”). They both are exuberant interviewees and speakers, and that makes the people around them just feel good. And when your network feels good about you—that’s a great thing. Heck—it gets you mentioned here!

Summarize the biggest lesson learned from all the interviews

I actually wrote an article about this recently.

Many of my guests have been creators or entrepreneurs in their own right (in addition to being some form of an investor).

So many of these guests have said something like, “It’s been a tough road and I failed a few times…but I’m so glad I started when I did!”

In other words, just start. Start that project you’ve been contemplating. Start working on a new habit. Start with that first $100 you want to invest.

You don’t have to “go big” right away. But just start. Build your momentum, learn along the way, and you’ll be surprised where you might be in a few short years.

Image Caption: Patience with puppies and investing is always required. Even when they dig holes in your furniture.

Teach us an investment lesson your dogs taught you

“Be patient. Be patient for growth to come. But also be patient when expectations aren’t realized.”

Dogs need time to learn and grow. But they’ll still be imperfect dogs, accidentally peeing inside or barking too much.

The blog had ~2000 readers in its first 9 months. By month 12, I was getting 2000 readers a week.

But it’s ebbed and flowed. While I’ve felt great about my writing in 2021, my readership has declined (thanks Google, you fickle beast).

My hope for continuous growth hasn’t been realized. But I’m ok with that.

And of course, we know that investing is a long-term game. We must be patient, and we must understand that there will be times where our expectations are not being met.

One of my favorite articles from this year looks at the topic. It compares actual stock returns against average stock returns.

And for many investors, there were periods in their life when it appeared the stock market had completely “let them down” e.g. underperformed historic averages.

But with enough patience, those investors would eventually see the market recover to expected levels. Keywords: with enough patience.