process
Buy the haystack
The rule
Do not hunt for the one needle. Buy the whole haystack. For most people the honest first step for growth is one cheap, broad index fund.
Where it flips
The haystack still falls in a crash. Indexing removes the stock-picking risk, not the market risk. It is the right default, not a promise against ups and downs. That is why time frame and temperament still matter.
Bogle's whole point is this. Instead of hunting for the few winning stocks (the needle), you can own the whole market (the haystack) at almost no cost. You then keep the market's return, minus almost nothing. For a beginner asking what the 'growth' rung really is, this is the answer. It needs no skill, no timing, and no stock-picking. Just a broad, low-cost index fund. It is why R0 can send most readers to the passive path with a clear conscience.
A worked example
Instead of choosing among 5,000 stocks, a beginner buys one broad index fund. Now they own a small slice of all of them. They get the market's return at a fraction of an active fund's cost. [illustrative]
How to spot it
- ·one broad, low-cost index fund at the core
- ·no attempt to pick winning stocks
- ·the 'growth rung' named plainly as an index fund
John C. Bogle · The Little Book of Common Sense Investing