Comparing Traditional Index Funds, Exchange-Traded Funds (ETFs), and Mutual Funds

For investors that have neither the time nor the expertise to research into individual companies and stocks (most of us), investment products such as mutual funds, ETFs, or traditional index funds offer an attractive option for diversifying your portfolio and managing risk.  These three key types of investment funds are similar in their approach of pursuing diversification through pooled assets, but differ in the way they are purchased or traded, expense ratios, and their management strategies.

Overview: Index funds are investment tools of pooled assets that seek to mimic a particular benchmark as closely as possible by purchasing all the equities or a representative sample of a particular index.  Traditional index funds are passively-managed meaning, unlike their mutual fund cousins, they do not rely on an active portfolio manager that would conduct market research and make choices to invest in particular companies’ equities.  An exchange-traded fund (ETF) is a hybrid investment product that has characteristics of both a mutual fund and a stock. ETFs, similar to mutual funds and traditional index funds, allow investors to diversify their investments by focusing on pooled assets rather than picking individual stocks, but they are considered more flexible as they are purchased and sold on the open stock exchange.  ETFs, mutual funds, and index funds often seek to track a particular index of stocks, commodities, fixed-income investments, or other assets. Investors can use these tools not only to purchase U.S. and international equities, but also other assets classes such as real estate, through Real Estate Investment Trusts (REITs), energy and commodities, and bonds and treasuries.

Comparing ETFs and Mutual Funds: The first major difference between ETFs and mutual funds lies in their investment strategies.  Most (but not all) ETFs are passively-managed, meaning they seek to track and match the performance a particular index, such as the S&P 500 for example, and will purchase all of the equities in that benchmark but will avoid case-by-case decisions on picking certain stocks over others.  While some mutual funds also track an index, they rely on an active portfolio manager to conduct research and forecasting and will make investment choices on particular stocks and other assets in an attempt to outperform the benchmark. The second key difference is that ETFs are traded on stock exchanges during normal trading hours, similar to stocks, whereas investors can only purchase or sell assets in a mutual fund daily at the end of the trading day.  Lastly, mutual funds generally have higher fees than both ETFs (and traditional index funds) since they rely on active managers that have to not only conduct research, but also trade more frequently to meet investor demand and to try to beat the market.

Comparing ETFs with Conventional Mutual and Index Funds: ETFs and index funds are very similar in the fact that they both normally pursue a passively managed strategy that tracks an index. Index funds and ETFs will purchase all the shares of a particular index in an attempt to match – but not outperform – the market gains (or losses) of the sector.  While some newer ETFs have active management strategies or pursue a hybrid approach with elements of both active and passive strategies, most ETFs are index-based and can therefore be considered a subset of overall index funds. The key difference between ETFs and traditional index funds is how the equities are purchased and how often they can be traded during the day.  ETFs are traded on an open stock exchange similar to stocks, and are able to sell throughout the day because they have entered into arrangements with third party brokers. With traditional index funds (and mutual funds) investors purchase their shares directly from the company managing the fund, and can only buy into or sell their assets once a day at the end of trading day based on the Net Asset Value (NAV) of the shares.  ETFs have lower initial minimum investment requirements since investors can purchase a single share of an ETF. Index funds and mutual funds often have a larger minimum initial investment often as much as $10,000.

Keeping track of the similarities and differences of ETFs, mutual funds, and traditional index funds can be difficult since their is significant overlap between the three and they are all essentially different methods of pursuing the same objective: investing in pooled assets to diversify your portfolio and lower risk.  The below chart should provide an easier comparison tool:


Traditional Index Funds ETFs Mutual Funds
Investment Strategy Passively-managed Most are passively-managed; some newer ETFs are actively-managed Actively-managed; portfolio managers pick stocks.
Structure Purchased and redeemed directly from the company managing the fund. ETF sponsors enter into contractual arrangements with 3rd party “Authorized Participants”, which are normally large brokers. Shares are purchased directly from company managing the fund.  
Trading Purchased/redeemed once daily at end of trading day based on NAV; may have minimum initial amount of $1K-$10K range; no stop, limit, or open orders.  No margin trading. Trade like an individual stock during trading hours, at market price; through stop, limit, and open orders, or on margin. Purchased or redeemed only once daily, at the end of trading day based on NAV. No stop, limit, or open orders.  No margin trading.
Fees Asset-weighted average of .24 % in 2016 according to Morningstar*; some fees as low as .04%. Asset-weighted average of .24 % in 2016 according to Morningstar*; some as low as .04%. Active funds had average expense ratios of .75 percent in 2016 according to Morningstar*
Price/Net Asset Value Price issued at 4PM each day Fluctuates throughout trading day like stocks. Price issued at 4PM each day.
Taxes*/ Capital Gains Generally more tax-efficient, as passive managers trade less frequently resulting in fewer capital gains distributions to investors. Generally more tax-efficient, as only Authorized Participants can purchase and redeem shares directly from ETF in large blocks, meaning fewer capital gains distributions to investors. Less tax efficient, as active mutual fund managers normally trade more frequently to keep up with demand and try to beat the market, resulting in more capital gains distributions.

Further research on fees can be found at the following Morningstar.–average-fund-fees-paid-by-investors-continued-to-decline-in-2016/

*This information is general in nature.  Please consult a tax adviser for questions regarding the tax implications of investments with respect to your unique situation.

Investment Risks and Benefits of Bonds

If you had asked me 10 years ago if I knew what a bond was, I would have responded with either “shaken not stirred” or “yeah, it’s that thing you buy from the U.S. Government that makes you a little money.”  It wasn’t until several books, articles, and hours of research later did I gain a better understanding of the various types of bonds, the role they play in a diversified portfolio, and risks from changing market interest rates.

To provide a quick introduction, bonds are fixed-income investments in which the purchaser or investor lends money to an entity such as a government, municipality, or corporation with the expectation that the issuer (the borrower) will make interest payments on a fixed schedule and eventually return the principal amount of the bond.  The entity issuing the bond is borrowing an amount equal to the price of the bond(s) from the purchaser, hence why bonds are the asset class are essentially a form of debt. In return, the issuer pays an interest rate on the bond, which determines the income that is paid in installments to the investor on a fixed schedule, most often semi-annually.  Bondholders will have received both the interest on the bond as well as their principal – the amount of the original purchase price – once the bond reaches its maturity date.  Bonds are often classified by their maturity dates as short-term (3 years of less), intermediate-term (4-10 years), or long-term (more than 10 years).  Investors can target a particular classification of bonds by purchasing them directly from the issuer – such as the U.S. Government – or investing in ETFs or index funds that track bonds with a particular set of maturity dates.

TYPES OF BONDSBonds come in many different shapes and forms, with varying issuers, maturity dates, interest rates and yields, and tax rules.  

  • U.S. Treasury Securities (Bonds, Notes, and Bills) – The most well-known type of bonds are those issues by the U.S. Government.  The U.S. Treasury issues securities of varying maturity dates ranging from a few days to thirty years, with different interest rates and yields depending on the perceived risk and market interest rates.  Normally the interest rates of U.S. bonds and treasuries increase with the length of time before the maturity date, as bonds with longer maturity rates have a higher likelihood of being affected by market interest rates.  Treasury notes have lower maturity dates of 2, 3, 5, 7, and 10 years. I-Bonds protect against inflation and can earn interest for up to 30 years. Treasury bonds. Treasury bills have short-term maturity dates ranging from a few days to one year.  Additional information on U.S. Treasury securities can be found at
  • Municipal Bonds: Municipal bonds, or “munis”, are bonds issued by a states, cities, or counties to raise capital for projects such as new schools or other infrastructure projects.  Municipal bonds are often recommended for higher income investors, as they are generally free from federal taxes. They may also be free from State or local taxes if the investor lives in the municipality that issued the bond.  Always consult with a tax expert before making investments on the basis of potential tax benefits.
  • Corporate Bonds: Corporate bonds are debt securities issued by companies seeking to raise capital for a variety of purposes, including research and development, financing mergers or acquisitions, or buying back stocks.  
  • International (Non-U.S.) Bonds: Foreign governments also issue bonds, but they are purchased and sold in the local currency.
  • Treasury Inflation Protected Securities (TIPS): TIPS are issued by the U.S. Treasury with either 5, 10, or 30 years maturity dates.  TIPS provide protection against inflation as the principal and interest rate payments increase with inflation (but also decrease with deflation).  For a comparison of TIPS and I-Bonds, see

Bonds merit inclusion in a portfolio because of two primary benefits they provide: 1) risk management and 2) fixed income generation.  While bonds are not without risk, their inclusion in the portfolio helps diversify a portfolio; reduce downside during bear markets, which enhances long-term growth; hedge against deflation; and generate income through yields that can be spent or re-invested in additional assets.

Risks Associated with Bonds:  In addition to market risk, bondholders have to contend with  other risk factors that can affect the price or yield of bonds.  Interest rate risk, credit risk, and liquidity risk are the primary risks associated with bonds and other fixed-income investments. Inflation risk, directly related to interest rate risk, must also be considered when investing in bonds as it make it more difficult to achieve real returns.

  • Interest Rate Risk – The monetary policies of the U.S. Federal Reserve (the “Fed”) have a significant impact on interest rates across the U.S. and global economy for lending and borrowing money, including the price and interest rates on U.S. Government bonds and treasuries.  In fact, interest rates on the 10-year U.S. treasury in particular are closely pegged to interest rates as set by the Fed. (Treasury yield curve rates can be accessed daily at  When market interest rates increase, which can occur as a result of quantitative tightening by the Fed, bond prices will decrease while their interest rates will increase.  Bond prices have an inverse relationship with market interest rates. For example, let’s say an investor purchases a bond at a $100 face value with an interest rate of 3%. After purchasing the bond, market interest rates rise to 4% but the coupon rate of 3% for the purchased bond remains intact.  If the investor wishes to sell that bond before the maturity date, that investor will only be able to sell that bond at lower than its original price since the older bond is competing with newer, higher-yield bonds at a 4% coupon rate. Additional information explaining the impact of market rates on bond prices can be found in the following useful U.S. Securities and Exchange Commission (SEC) investor bulletin on interest rate risk:


  • Credit Risk (Default Risk) – The starting point for understanding default risk is recognizing that a bond is basically an IOU and, as with any form of debt, there is a chance the borrower will not be able to pay back the loan or make interest rate payments.  The creditworthiness of the issuer of the bond determines both the risk and the potential yield for the bond. U.S. Government bonds are generally considered low risk due to the low likelihood that the U.S. Government will go bankrupt, default on its loans, and be unable to pay back its bondholders.  On the other end of the spectrum, high-risk, high-yield bonds, knowns as “junk bonds”, have higher yields because of lower creditworthiness and a higher likelihood that the corporation issuing the bond will default on its obligations and be unable to pay back its bondholders. However, junk bonds are not the only bonds with default risk and high credit ratings do not equal zero risk.  (Before the financial crisis of 2008, hundreds of billions of dollars in mortgage securities that held inaccurately high credit ratings were ultimately proven to be an extremely high risk after the underlying mortgages went into default.) Credit ratings for corporate bonds range from the highest rating of AAA (“triple A”) to the lowest rating of D. Anything above BBB- (S&P and Fitch scale) or Baa3 (Moody scale) are considered “investment-grade”.  Anything BB+/Ba1 or below are considered “high-yield” or junk bonds.


  • Inflation Risk: Inflation is the general increase in the prices of goods and services throughout the economy, which reduces the purchasing power of money.  Inflation is not a characteristic or risk specific to bonds, but rather a normal and expected occurrence in the overall economy and directly related to interest rate risk.  Inflation expectations can prompt the Fed to hike interest rates to make it more difficult to lend and borrow money in an attempt to prevent an overheating economy. In addition, inflation cuts away at nominal returns, making it more difficult for bond yields (and other assets) to provide a real return (the return to the investor after accounting for inflation).  TIPS and I-Bonds are Treasury securities that can protect investors against inflation.


  • Liquidity Risk: Liquidity is how fast an investor can sell an asset and convert it into cash.  Investors seeking to sell their bonds face the risk of not being able to receive the price that reflects the true value of the bond.  Liquidity risk is directly related to interest rate and credit risk as those variables can change the price at which one can sell a bond before the maturity date.  Purchasing bonds through ETFs may increase the liquidity of bonds by making it easier to sell them during normal trading hours, but it will not eliminate interest rate and credit risk.

The Role of Bonds in a Portfolio: Bonds play an important role in an investor’s portfolio, as they provide both a means of diversification as well as a means of fixed income.  Having only stocks in a portfolio – even if it is a diversified group of stocks is fully diversified – poses significant risk to an investor as the stock market as a whole can move in the same downward direction in a bad bear market or during a financial crisis.  Bonds and other fixed income investments are often less correlated with equities and other investments and will continue to provide some predictable income even when the rest of a portfolio is struggling.

  • Diversification – Bonds and other fixed income investments are often less correlated with equities and other investments, meaning their prices often move in different directions.  Diversification and rebalancing one’s portfolio, if done effectively, can decrease risk in a portfolio without sacrificing gains. (For more in depth background, research into Modern Portfolio Theory).
  • Predictable Income – Yields from bonds can provide an effective means of predictable income even when the rest of a portfolio is struggling.  Investors nearing retirement or already retired may desire a higher ratio of bonds in their portfolio to provide some stability and regular income when the overall stock market or other sectors are struggling.
  • Hedge against Deflation – While bonds may be less appealing during times of inflation, long-term bonds in particular are often considered a good hedge against deflation, as bonds tend to perform better than stocks during deflationary periods (Deflation is caused by an overall decrease in consumer demand and a resulting decrease in prices, which hurts companies’ profits and may require worker layoffs).
  • Protecting Principal – In addition to the benefits from diversification, bonds are an effective tool for reducing risk by protecting your principal.  While low-risk bonds may have lower nominal returns, or even negative returns in times of significant inflation, bonds are more effective at protecting your initial investment than equities and commodities. Corporate bonds are generally considered less risky than equities as companies have a legal obligation to pay back bondholders and in the event of the a bankruptcy companies will pay back bondholders before paying dividends to stockholders.  This is discussed in further detail in 5 Examples of Fixed-Income Investments.

5 Examples of Fixed Income Investments

What is a Fixed-Income Investment?

Fixed-income assets are a class of investments that provide a fixed schedule of income based on the coupon rate – or interest rate – which in part determines the yield of the asset.  The yield of a fixed-income asset is based on the interest rate and is divided and distributed in equal parts on a fixed schedule.  For example, if the interest rate on a $10 asset is 2 percent, and the schedule for distributing the yield on the investment is semi-annual until the asset matures after one year, the total return of 20 cents would be distributed in one payment of 10 cents after six months and another at 12 months.

Examples of Fixed-Income Investments

While bonds are the most common and well-known example, Certificates of Deposit (CDs), fixed annuities, money market funds, and asset-back securities are also fixed-income assets.  In addition, one can invest in fixed-income assets through bond exchange traded funds (ETFs) and bond funds.

  • Bonds – Bonds are are fixed-income investments in which the purchaser or investor lends money to an entity such as a government, municipality, or corporation.  The issuer of the bond is essentially borrowing an amount from the purchaser equal to the price of the bond, hence why bonds are considered to be a form of debt.  In return, the issue pays an interest rate on the bond, which determines the yield that is paid in installments to the investor on a fixed schedule, most often semi-annually.  Bondholders will have received both the full return on the bond as well as the amount of the original purchase price of the bond once the bond reaches its maturity date.
  • CDs – CDs are certificates issued by banks for an investment of a fixed amount of time known until the maturity date.  Banks issue CDs as a means of attracting additional capital, and pay the fixed interest rate in addition to returning the principal value of the CD to investors after the maturity date of the CD.  CDs normally have a higher interest rate than most checking and savings accounts, and are therefore may be an attractive option for investors with low-risk, short-term savings or investment goals.  CDs are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000.  The potential downside and risk to owning CDs is that the money is not as accessible as cash in a money market, checking, or savings accounts, as the investor must wait until the maturity date to receive the full principal of the CD and the interest.  Cashing in CDs before the maturity date comes with a penalty that can eat away not only at the interest payment you would have received, but also the principal purchase price of the CD.
  • Money Market Accounts – Money market accounts are interest bearing accounts that normally have higher interest rates than checking and savings accounts, and are often considered another attractive option for short-term savings and emergency funds.  Investments in money market accounts are more accessible and liquid than CDs, as they often allow investors to write checks from the money in the accounts, albeit sometimes on a more limited basis.  Money market deposit accounts are also insured by the FDIC up to $250,000, which provides protection for your principal investments.
  • Fixed Annuities – Fixed-income annuities convert a person’s savings into regular income payments over a certain period of time (normally one to ten years).  The investor enters in an annuity contract in which they contribute either a lump sum of money or series of contribution and the institution agrees to make regular payments to the investor that incorporates the yield on the investment determined by the interest rate.  Fixed annuity contributions are normally tax-deferred, meaning you’ll receive your principal back tax-free,  but income and growth on the annuity may be taxable.  (You should consult a tax professional before making investment decisions based on expectations of tax deferrals or tax-free growth.)
  • Asset-Backed Securities – Asset-backed securities are fixed-income investments that are backed by a pools of assets by a lending institution.  The institution offers  these securities as a means of raising additional capital.  The assets used to back the development and offering of the securities are normally a pool of loans with similar interest rate, structures, and maturity dates.  Mortgage-backed securities (MBS) – which are backed by a mortgage or collection of mortgages – are a well-known example of asset-backed securities.


6 Introductory Lessons on Stocks

Overview: Owning a share of stock is owning a portion of an entire company, hence why stocks are often referred to as “equities”, referring to shareholders’ ownership of a portion of a company’s overall equity.  Decades ago, when one bought a share of stock they would actually receive a physical certificate exhibiting his or her ownership of that share of the company.  Today, most trading occurs electronically through online brokerages.  The group of individuals or investment firms that own stocks in a company are referred to as the company’s shareholders.

The overall stock market is made up several exchanges, such as the New York Stock Exchange (NYSE) and Nasdaq.  The price of stocks on these exchanges are based on the supply and demand for those stocks.  It is important to remember that, in addition to market trends such as continued growth in a particular industry or other factors that might affect an individual business, psychological factors can also have a significant impact on demand and prices and cause prices to increase beyond their market value.  When a “correction” – normally defined as a decrease of around 10 percent from a recent peak – occurs in the overall stock market, experts may attribute it to an overvaluation of equities among other potential causes of investor uneasiness.

Common vs. Preferred Stock: There are two types of stocks that a company will offer shareholders: common stock and preferred stock.  Most everyday investors that purchase equities are likely purchasing common stock, which is the most common type of stock issued by companies.  Common stockholders are normally given voting rights in the company, whereas preferred stockholders do not have voting rights, but have a a greater stake in the company.  Common stockholders are also not guaranteed to receive dividends on their shares.  In general, common stock is riskier with more potential for growth than preferred stock, which is less volatile but has less room for capital growth.  (Note: This follows the general rule of thumb that investments with greater risk have greater potential for returns through higher yields, in the case of bonds, or capital growth).

Trading: The most common place to purchase equities is through a public exchange, such as the New York Stock Exchange (NYSE), where companies list their shares for buying and selling. One can generally purchase equities through a brokerage that acts as the intermediary between the company and the individuals or investment firms that are buying or selling the stock. As such, although you are investing directly in a company by purchasing a share of its stock, everyday individual investors are seldom buying stock directly from the company. One should always remember that the brokerage firms that handle these transactions normally charge a fee for stock trades and investors should factor in that cost considering any decisions on trading equities. One can invest in the equities not only by purchasing stocks from an individual company, but also through index funds and Exchange Traded Funds (ETFs), both of which will be discussed in further detail in future posts. Stocks and ETFs can be traded via limit orders, in which the seller and/or purchaser sets a limit – either a “not-to-exceed” or “no less than” price – that must be met before the trade is executed. When submitting a limit order, investors can choose a time horizon during which their proposed price limit will remain valid, such as for the remainder of the day or for 60 days, for example. Equities can also be purchased via a market order, in which no limit is set by the buyer and/or seller and the trade will be conducted immediately at the current price of the equity in the market. One can generally trade equities on public exchanges during the hours of 9:00am to 4:00pm during the work week.

Potential Earnings and Income: Income and earnings from equities come from two sources: 1) the potential growth in the value of that stock, known as “capital gains“, and 2) income from dividends which are normally paid out to shareholders on a quarterly basis.  Dividends represent a portion of the some of company’s profits, which are returned to the company’s owners, i.e. its shareholders. Investors can elect to either reinvest their dividends in additional shares automatically or have those dividends routed to a separate holding account for a future decision.

Risk and Diversification:  There is no asset class in which you can invest without risk.  The risks of purchasing individual equities comes with risk that originates from both the overall volatility of the stock market as well as the risk that an individual company could see decreased earnings or even go bankrupt.  When a company goes bankrupt, accept the most risk since they own a portion of the company. Regular shareholders will not get paid until after creditors, such as banks or bondholders, and preferred share holders, meaning there is no guarantee that they will receive the value of their stake in the company. For further reading on the subject or corporate bankruptcy, consult the below list of further online reading.  Some of the risk of investing in individual securities can be partially mitigated through diversification, for example by focusing on investments that track an entire index(as opposed to one company), such as the Standard & Poor (S&P) 500 index.  This approach still poses investment risk market trends and volatility,  which can affect not only individual companies or a single index, but also the entire stock market.

Alternative Methods:

Short-Sale of (“Shorting”) a Stock (or other asset): Taking a short position on an asset, or “shorting”, refers to any transaction through which the investor can profit from the decrease in the value of the asset.  To conduct such a transaction normally investors will borrow stocks and immediately sell them, with the expectation that the value of the asset will decrease in value and they will be able to purchase it back at a lower price later before returning it to the lender.  If the price of the stock decreases as expected, the investor profits from the decrease in value, after having borrowed and sold the stock at the higher price,  bought it back at a lower price, and then returned the stock to the lender.  Investors will “short” an asset when they anticipate the value of the stock to decrease in the future, i.e. betting against that asset.

To provide a simple example, an investor “shorting” one share of a certain company borrows and immediately sells that share to another investor at a value of $10.  A few months later, the stock decreases to $8 and the investor purchases the stock at that price and then returns it to the borrower.  The investor has just profited $2 – the difference between the original price the later purchase price – from shorting the stock and buying it later at a lower value.

Shorting stocks is generally considered to be much riskier than taking a “long position”,  i.e. buying and holding a stock in the expectation that its value will increase, and therefore may not be advisable for the everyday investor trying to plan for retirement.  Short selling is a more advanced approach to investing as it involves making market predictions, which most investors, even the experts, have a hard time doing.  Future posts and discussions on equity investing will focus instead on long-term approaches to successful investing through diversification and asset allocation, risk management, and methods for reducing fees and taxes.


  1. Overview: Investing in a share of stock is purchasing and owning a portion of an entire company.
  2. Earnings/Income: Potential earnings from equities come from both the potential growth of the value of the stock, known as “capital gains”, as well as the dividends paid out to shareholders by the company.
  3. Trading: Stocks are traded on stock exchanges in which investors can purchase equities by choosing individual companies or through other mechanisms such as index funds and exchange-traded funds (ETFs).
  4. Risk and Diversification: Investing in equities involves risk from volatility in the overall market as well as risks related to the failures of the individual company, which includes the possibility that a company can go bankrupt.  Diversification can help mitigate, but not eliminate, investment risk (more to follow in future posts).
  5. Valuation of Stocks: In addition to market and business variables, psychological factors can affect the demand for stocks.
  6. Alternative Equity Investment Approaches: Alternative approaches to equity investing, such as “shorting” stocks, are more advanced and likely pose greater risk to everyday investors.

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The material contained herein is not investment or financial advice and is for informational purposes only.  Individuals should carefully research their own financial and investment decisions based on personal circumstances and seek the advice of Registered Investment Advisers and/or other professional experts when appropriate.

No patent liability is assumed with the use of the information herein.  Although every precaution has been taken to ensure the information contained in this website is accurate and complete, the author(s) of this information assume no responsibility for errors or omissions.  Neither is any liability assumed for damages resulting from the use of the information contained herein.



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Mission and Vision: Building Finance and Investment Literacy One Person at a Time

FIB will seek to build a foundation and focus on the fundamentals: providing basic information on different asset classes, investment strategies, diversification, and asset allocation. 

The vision that motivated the creation of FIB is a world where every individual has developed the basic tools and skills to build wealth, take care of their families, and plan for a comfortable retirement.

The greatest impediment to financial security is a lack of financial literacy and a failure to conduct adequate study and research on topics related to personal finance and investment.  While most of the basic information on investment and finance is accessible via books, websites, and other sources, very few of these resources are free and many of the online resources can be cumbersome and difficult to navigate.  To help address this problem, I have created the Finance and Investments Basics (F.I.B.) website to provide easy access to financial and investment information and resources for those who wish to gain and maintain control of their own financial destiny.  My hope is that these resources will help you build the knowledge, skills, and tools necessary to manage your own finances – instead of paying others high fees and commissions to do it for you – and build a future of financial success for you and your offspring.

This site is intended to be a first step in gaining the information and resources need to build financial literacy, but should not be treated as the “end-all-be-all” for finance and investment data.  The information contained herein will not only help you build an introductory understanding of certain finance and investment topics, but will also act as a corollary to other recommended resources through which you can continue your research and  further your journey to full financial literacy and security.  The vision that motivated the creation of FIB is a world where every individual has developed the basic tools and skills to build wealth, take care of their families, and plan for a comfortable retirement.

FIB takes a multi-pronged approach to educating readers on personal finance and investment.  First, rather than focusing on the “hot topic” or mania of the day or delving unnecessarily into current market trends (which are not a reliable indicator for future trends), FIB will seek to build a foundation and focus on the fundamentals: providing basic information on different asset classes, investment strategies, diversification, and asset allocation.  Next, FIB will review some basic lessons learned and common pitfalls of personal finance and investing, some based on personal experiences and others based on information available from leading literature and figures in the personal finance and investment world.  Lastly, as mentioned above, FIB will be a nexus to other resources and information through a list of recommended readings from other books and websites.  As Benjamin Franklin astutely noted, “an investment in knowledge pays the best interest.”  I hope FIB proves useful to everyone that reads and follows these posts and enhances our collective ability to build and maintain wealth, one person at a time.

“An investment in knowledge pays the best interest.” — Benjamin Franklin

FIB Goals and Objectives:

  • Build individual knowledge and skills in personal finance and investing through the provision of easily accessible information and resources on relevant topics.
  • Help individuals develop the self-sufficiency necessary to manage their own assets and portfolios and avoid unnecessary fees and expenses from having to pay others to do it for them.
  • Encourage personal study and education in the fields of personal finance and investment to improve our collective financial literacy at the national and global level.
  • Arm individuals with the information and tools needed to effectively plan for retirement.

What FIB will NOT do:

  • FIB will not ask for your bank account information or that you entrust us with managing your money.  We want you to develop the knowledge and skills to do that yourself.  As the old adage says, we’d rather give you the fishing pole and teach you how to fish than catch the fish for you.
  • FIB will not try to sell you on a gimmicks or “get-rich-quick” schemes.  The information on this site is focused on providing practical information to enhance your knowledge and build long-term financial security.
  • FIB will not try to make predictions on market trends or the next big stock pick.  Even the foremost experts in these subjects are more often than not unable to predict the future.  We similarly do not have a crystal ball and will not pretend that we have can predict the next big boom or crash.
  • As noted in the disclaimer, FIB will not provide financial advice catered to a specific individual and his/her personal circumstances.  Before making financial and investment decisions, individuals should consider their own financial situation and consult with a professional as appropriate.
  • FIB will not discuss in great detail the more advanced and risky approaches for investing, such as hedge funds, “shorting” stocks, and methodologies for analyzing individual companies and securities that investment geniuses such as Warren Buffett might employ.  The information in this site is focused on providing the basic tools for successful and responsible long-term investing, with an emphasis on those planning for retirement.  However, so readers are aware that there are other methods and tools available, and in case you’ve outgrown this website and want to conduct more research on your own (which would be a good news story), I will briefly mention and define a few such topics.


Copyright © 2018 Finance and Investment Basics. All rights reserved.