Jack Bogle:65 Years Investment Experience Condensed Into 7 Tips

John Clifton "Jack" Bogle is an American investor and philanthropist. He is the founder and retired chief executive of The Vanguard Group.

Vanguard is now one of the world’s largest fund managers and looks after about $4trillion of investments on behalf of clients.
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What's interesting, is that Vanguard is a mutual. That means no shareholders. All profits go back to investors. It’s a good model. I like it.

Jack has just written an essay in the Financial Analysts Journal in which he condenses what he’s learned from 65 years in the investment industry.

It’s pitched at financial nerds, and if that’s you, it's compulsory reading.

If that’s not you, he still includes a seven-point plan for the average investor…. these are 7 gems from one of the investment greats.

For regular readers of this blog, you will have heard all this before.  Yet, there are still so many people out there who don’t have the basics in place.

If you know anyone who’d benefit from Bogle’s wisdom, please share these tips with them.
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Take it away Jack.

“Most of my books, essays, and speeches have focused on what I believe are the best interests of investors—the human beings whom we are all doing our best to serve. Perhaps this sampling of advice that I have offered over the years may be useful to other investment professionals.

• 1. 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.
• 2. Time is your friend. Investing is a virtuous habit best started as early as possible. Enjoy the magic of compounding returns. Even modest investments made in one’s early 20s are likely to grow to staggering amounts over the course of an investment lifetime.
• 3. Impulse is your enemy. Eliminate emotion from your investment program. Have rational expectations for future returns, and avoid changing those expectations in response to the ephemeral noise coming from Wall Street. Avoid acting on what may appear to be unique insights that are in fact shared by millions of others.
• 4. Basic arithmetic works. Net return is simply the gross return of your investment portfolio less the costs you incur. Keep your investment expenses low, for the tyranny of compounding costs can devastate the miracle of compounding returns.
• 5. 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.
• 6. 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. Remember the Biblical injunction, “So the last shall be first, and the first last” (Matthew 20:16, King James Bible).
• 7. 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. (Just ask investors who moved a significant portion of their portfolio to cash during the depths of the financial crisis, only to miss out on part or even all of the subsequent eight-year—and counting—bull market that we have enjoyed ever since.) “Stay the course” is the most important piece of advice I can give you.

Over the long run, the growth trends in our economy and financial markets have been solidly upward, despite the gyrations and uncertainty we inevitably experience as the years roll by. It is reasonable to assume that this growth will continue. Do not let false hope, fear, and greed crowd out good investment judgment. If you focus on the long term and stick with your plan, success should be yours.

The entire article can be found here: Balancing Professional Values and Business Values
 
Bogle's 1999 book Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor became a bestseller and is considered a classic within the investment community.

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