Questions over “BBC World Service 50 Things that Made the Modern Economy”
1. Who was Jack Bogle?
2. How much money is invested in the funds he pioneered?
3. Describe Warren Buffett.
The world’s richest investor who’s worth tens of billions of dollars through selecting right
investments.
4. What is his investing advice?
His advice was pick the most mediocre investments. Put everything into a low cost S&P Index
Fund. Do not try to beat the market but get its relatively stable returns.
5. Describe an index fund
An investment that puts the money into stocks of multiple companies instead of one in a given
market that is supposed to track, and return investment on, the overall growth of the market
instead of just hedging bets on just one company.
6. What were Charles Dow’s ideas? (not what he founded)
Take the price of famous companies stocks and average them and the publish its growth or decline.
7. Research: What does FTSE (pronounced footsie) stand for? Which country’s stocks does it track?
Financial Times Stock Exchange 100 index tracks the stocks for the United Kingdom.
8. How did Paul Samuelson change economics?
He made economics more mathematical and statistical instead of debating and random
speculation.
9. What’s the most important idea in financial economics?
If investors think rationally about the future, then everything should seem random in the future
in terms of the price of the market – this is called the efficient market hypothesis.
10. Describe the intuition of this idea
If you are able to predict the market’s movement in the future, then everything else you should
see will be random since the only movements left are those that you did not predict.
11. Complete this sentence: “In the long run most professional investors…”
Did not beat the market.
12. Research: What does the Standard and Poors 500, AKA the S&P 500, track?
It tracks the top 500 public companies in the United States, by market cap, stocks.
13. What did the article, “Challenge to Judgement” conclude?
It concluded that most investors actually do not beat the market and, in fact, underperform it.
Essentially, most investors’ judgements are just wrong.
14. How does investing in a cheap index fund like the S&P 500 save investors’ money?
Because it just gives returns based on the growth of a market as a whole and spares investors
from risking lower return rates with managers who try to beat the market.
15. What did Jack Bogle do? DESCRIBE his innovation.
He created the vanguard index fund that tracked growth of different markets that made
investing more accessible to ordinary individuals and promised steady returns.
16. Was his innovation successful at first?
No, no one bought the idea and some called it downright unamerican.
17. What do are active funds do that make them more expensive?
Because they trade a lot of stocks and pay analysts and paying the managers. The fees can eat
up your portfolio.
18. Complete this sentence, “Eventually fees can eat away…”
One fourth of your funds.
19. In the long run do most analysts beat the market?
No, most do not beat the market in the long run.
20. What’s Paul Samuelson’s insight?
If the market is working well, you should sit back and go with the flow.
21. Describe “mark to market accounting”
Banks accountants would figure out their own worth by looking at the bank in the market.
22. What’s the risk of mark to market accounting?
It leads to self-made booms and busts.
23. What “inventions” did Samuelson rank along side with Mr. Bogle’s invention?
He puts it with the wheel, alphabet, wine and cheese, and the printing press.
24. John C. Bogle told his story in the Wall Street Journal article “How the Index Fund Was Born”.
When was it published?
It was published on September 3rd 2011.
Research: List and describe three Vanguard Mutual Funds
Vanguard Large Cap - Invests in the largest public companies in the United States by market cap.
Vanguard High Dividend Yield – Puts investments into the companies that give the largest dividend yield,
but not necessarily the largest dividends.
Vanguard Windsor II Fund – Invests money into mid and large cap companies in the U.S. that are
considered undervalued (trade at prices below average)