Page 97 - Ready Set Retire

Ready. Set. Retire!

…the financial system put up zero percent of
the capital and took zero percent of the risk
and got almost 80 percent of the return. And
you...the investor…put up 100 percent of the
capital, took 100 percent of the risk, and got
only a little bit over 20 percent of the return.3

To address that, Bogle invented the low-cost index fund and
founded Vanguard, which has since become a market leader in
mutual funds. However, as we saw in our discussion of the
Efficient Frontier, these funds may be more affordable, but
not always as efficient as one might want, which can cost a lot.

Mutual funds come in two broad categories: open-ended and
closed-ended. Open-ended mutual funds are generally what we
think of when discussing mutual funds. They are bought and
sold directly from the mutual fund company. You do not need
a brokerage account to purchase a mutual fund. When you
purchase shares of an open-ended mutual fund, the fund issues
brand new shares no one else has ever owned. When you sell
them, those shares are retired, never to be purchased again.
There is no limit to the number of shares an open-ended fund

3 http://www.pbs.org/wgbh/frontline/film/retirement-gamble/

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