Why Vanguard is Too Big: Part X: A Lesson from My Father About Paying Too Much

Your Survival Guy’s Dad.

Your Survival Guy learned how to be a successful real estate investor from my dad. He taught me that price always matters, but he also understood the magic of time. If you need to pay a higher price to be in the game, you get in the game, especially when you’re young.

When Becky and I were buying our first home, my dad couldn’t believe how much we were paying. But he also realized that when you’re young, you have a better chance of surviving if you happen to pay too much. You have time on your side—and a job—and nothing focuses the mind like a mortgage.

But what if you don’t have time? Price can be a brutal judge of character when it doesn’t go your way.

“When a man places his money on a horse, he does not change a hair of that horse’s make-up; the horse performs the same regardless of whether there is fifty dollars or a king’s ransom riding on his back,” writes Richard Russell in Barron’s on May 18, 1959.

The market doesn’t care whether you’re just starting out, need the money for a grandchild’s education, or need it for your retirement. It doesn’t care about your needs.

Consider all the emotion tied up in the Vanguard Total Stock Market Fund and others mimicking market-cap weighted indices. Most business school graduates still can’t tell you how market cap is calculated—multiply a company’s total shares outstanding by its stock price—or the degree to which price drives this bus.

When it comes to your hard-earned money, you need to understand how much is riding on price and if you have what it takes to benefit from the magic of time. Remember, whether it’s your first house or your last stock, its price doesn’t care who you are.

Action Line: Read my series on why Vanguard is too big, and make sure you understand what you own and why you own it. You can do this.

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E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West (RIP JB) and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com To sign up for my free monthly Survive & Thrive letter, click here.

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