Advice from John Bogle

Vanguard announced the passing of legendary Founder John Bogle on January 16, 2019.  Mr. Bogle had legendary status in the American investment community, largely because of two towering achievements: He introduced the first index mutual fund for investors and, in the face of skeptics, stood behind the concept until it gained widespread acceptance; and he drove down costs across the mutual fund industry by ceaselessly campaigning in the interests of investors. Vanguard, the company he founded to embody his philosophy, is now one of the largest investment management firms in the world.

Here are 7 tips from an essay John Bogle wrote for the CFA’s Financial Analysts Journal “Balancing Professional Values and Business Values”: 

  • Invest you must. The biggest risk facing investors is not short-term volatility but, rather, the risk of not earning a sufficient return on their capital as it accumulates.
  • Time is your friend. Investing is a virtuous habit best started as early as possible. Enjoy the magic of compounding returns.
  • Impulse is your enemy. Eliminate emotion from your investment program.
  • Basic arithmetic works. Net return is simply the gross return of your investment portfolio less the costs you incur. Keep your investment expenses low.
  • Stick to simplicity. Basic investing is simple—a sensible allocation among stocks, bonds and cash reserves; a diversified selection of middle-of-the-road, high-grade securities; a careful balancing of risk, return and (once again) cost.
  • Never forget reversion to the mean. Strong performance by a mutual fund is highly likely to revert to the stock market norm—and often below it.
  • Stay the course. Regardless of what happens in the markets, stick to your investment program. Changing your strategy at the wrong time can be the single most devastating mistake you can make as an investor.

Learn more from John Bogle by picking up one of his books starting with The Little Book of Common Sense Investing (2007).

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