Vanguard Group founder Jack Bogle recently offered up his seven secrets of success, and savvy investors would obviously be wise to listen.
“The tips are part of an extensive essay Bogle wrote for the CFA Institute on balancing professional and business values. It’s a long, worthwhile read from a man many consider to be the head of the index investing revolution,” ETF.com wrote, while also encapsulating the essay.
- 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.
“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,” said Bogle, the founder of the Vanguard Group, the world’s largest provider of mutual funds with $4 trillion in global assets under management.
“It is reasonable to assume that this growth will continue,” he said. “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.”
Meanwhile, Bogle, in an interview with WSJ Wealth Adviser, says that while there aren’t any easy answers, asset allocation is the place to start investing.
“I would advise someone who has just retired to be something in the broad range of 50/50 stocks and bonds,” Bogle told the WSJ.
And you'd be wise to follow Bogle's advice. Why?
Because one of the most respected investment gurus of all time recently cited Bogle as his hero.
Billionaire investor Warren Buffett praised Bogle in his annual letter to Berkshire Hathaway Inc. shareholders.
The pioneer of indexing was once an outcast in the investment world as he eschewed riches to provide real value to American investors, Buffett wrote.
“In his early years, Jack was frequently mocked by the investment-management industry,” Buffett wrote. “Today, however, he has the satisfaction of knowing that he helped millions of investors realize far better returns on their savings than they otherwise would have earned. He is a hero to them and to me.”
Bogle started the indexing revolution for retail investors in 1976 when he launched the Vanguard 500 Index Fund. The fund, which just passed its 40th anniversary, had $205 billion in assets as of Aug. 31, Bloomberg reported.
(Newsmax wire services contributed to this report).
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