Passive Index Funds-Power of Compound Interest (fees)

Posted on March 3, 2015 by Old Town Academy

First, there is the expense ratio — about 1.12 percent of assets for the average large capitalization blend fund. Then there are transaction costs and distribution costs. Active funds also pay a penalty for keeping a share of their assets in low-yielding cash. Altogether, costs add up to 2.27 percent per year, Mr. Bogle estimates.

By contrast, a passive index fund, like Vanguard’s Total Stock Market Index Fund, costs merely 0.06 percent a year in all.

Of course, Mr. Bogle has a horse in the race. He founded the Vanguard Group. He invented the first index fund for the public. His case is powerful, nonetheless.

Assuming an annual market return of 7 percent, he says, a 30-year-old worker who made $30,000 a year and received a 3 percent annual raise could retire at age 70 with $927,000 in the pot by saving 10 percent of her wages every year in a passive index fund. (Such a nest egg, at the standard withdrawal rate of 4 percent, would generate an inflation-adjusted $37,000 a year more or less indefinitely.) If she put it in a typical actively managed fund, she would end up with only $561,000.

via Americans Aren’t Saving Enough for Retirement, but One Change Could Help – NYTimes.com.

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A Billionaire Mathematician’s Life of Ferocious Curiosity – cf Ilan’s “7 Second Rule” (Before you answer a math problem)

Posted on July 8, 2014 by Old Town Academy

Down one floor from his office complex is Math for America, a foundation he set up to promote math teaching in public schools. Nearby, on Madison Square Park, is the National Museum of Mathematics, or MoMath, an educational center he helped finance. It opened in 2012 and has had a quarter million visitors.

“I wasn’t the fastest guy in the world,” Dr. Simons said of his youthful math enthusiasms. “I wouldn’t have done well in an Olympiad or a math contest. But I like to ponder. And pondering things, just sort of thinking about it and thinking about it, turns out to be a pretty good approach.”

Dr. Sullivan said that Dr. Simons, in his career, had made a series of seminal contributions and that an early one “revolutionized the consciousness of later generations.” He added that in May 2013, to celebrate Dr. Simons’s 75th birthday, four American math and science luminaries gave lectures about fields he had advanced.

Forbes magazine ranks him as the world’s 93nd richest person — ahead of Eric Schmidt of Google and Elon Musk of Tesla Motors, among others — and in 2010, he and his wife were among the first billionaires to sign the Giving Pledge, promising to devote “the great majority” of their wealth to philanthropy. Continue reading →

So, Who Invented Double Entry Bookkeeping? Luca Pacioli or Benedikt Kotruljević? | Steve Mariotti

Posted on June 21, 2014 by Old Town Academy

$Italian Inventor of Double Entry Bookkeeping luca-pacioli-portrait$

Not Luca Pacioli?

Assets = Liabilities + Owners’ Equity.

Ouch! He was right: The first recorded history of the description of double entry bookkeeping was done by Benedikt in 1458 in his work: Book on the Art of Trade.

Although only in a short appendix, it was the first description of what was as one of the world’s great intellectual breakthroughs — modern accounting. This craft enables merchants, entrepreneurs and their investors to keep track of every penny they received or spent.

Thanks to accounting, it allowed people to organize massive amounts of information into journals and then produces summary financial statements — Continue reading →

No Accounting Skills? No Moral Reckoning

Posted on June 20, 2014 by Old Town Academy

THE GREAT DIVIDE

By JACOB SOLL APRIL 27, 2014

SOMETIMES it seems as if our lives are dominated by financial crises and failed reforms. But how much do Americans even understand about finance? Few of us can do basic accounting and fewer still know what a balance sheet is. If we are going to get to the point where we can have a serious debate about financial accountability, we first need to learn some essentials.

The German economic thinker Max Weber believed that for capitalism to work, average people needed to know how to do double-entry bookkeeping. This is not simply because this type of accounting makes it possible to calculate profit and capital by balancing debits and credits in parallel columns; it is also because good books are “balanced” in a moral sense. They are the very source of accountability, a word that in fact derives its origin from the word “accounting.”

In Renaissance Italy, merchants and property owners used accounting not only for their businesses but to make a moral reckoning with God, their cities, their countries and their families. The famous Italian merchant Francesco Datini wrote “In the Name of God and Profit” in his ledger books. Merchants like Datini (and later Benjamin Franklin) kept moral account books, too, tallying their sins and good acts the way they tallied income and expenditure. Continue reading →