JOHN C. “JACK” BOGLE, 84, has influenced your life in a major way – assuming you’ve ever invested in a mutual fund. Back in 1975, Bogle created this radical tool called an “index fund”, an intentionally boring mutual fund that mirrors the performance of a broad-market index. He championed low-cost, long-term investing and founded the US’s only client-owned mutual-fund company, Vanguard, which manages a cool $2.1-trillion (but doesn’t take a profit). Bogle has written 10 books that are essential reading for anyone investing today. Start with 2008’s Enough (R249, Kalahari). Want to retire with a pile of cash? Then read on.
By MH Staff - Posted on 8th January 2014
Follow these rules from one of the world’s legendary investors, and your future will be flush – guaranteed.
“When we all speak of ‘the stock market’, it’s meaningless. It’s merely the value investors put on all those securities, thousands of different stocks with a value of $15-trillion. It goes up and it goes down, but in the long run it goes up. The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.”
“Your job is to capture as much of the market return as possible for as long as possible. The only way to start investing for a lifetime is to buy a broad-market index fund. Don’t pick an actively managed mutual fund. Don’t pick stocks. Don’t pick hedge funds. In the long run, I believe in owning the stock market, not having a manager own little pieces of it for you.”
“I ask people: what is the intellectual basis for indexing? Reduce cost and you maximise your fair share of the market return. What is the intellectual basis for active managing or stock picking? It’s basically ‘I can do better’. Is that an intellectual basis? No! It’s a hope, it’s a brag, and it has no chance of ever being realised in the long run.”
“I look at indexing as being simple and, sad to say, boring. Be bored by the process but elated by the outcome. In a casino, it’s the opposite. You’re elated by the process, by the moment, but you’re bored by the outcome because you know exactly what it’ll be. The more you bet, the more you lose. Investing shouldn’t give you a rush.”
“It’s foolishness to think you can beat the market. There are only two things working here: how much did it cost to get into the market, and how long are you in? If you’re investing for a lifetime –and you should be, saving for retirement and educating your kids along the way – if you’re 20 years old now, you should be thinking 60 or 65 years as your time horizon.”
“There used to be a company that purported to tell you ‘the Number’ [how much you need to retire]. It’s more complex than that. It’s what that money is worth in 30, 40, 50 years. Everyone is looking for the Answer, and there really isn’t an answer except save. Save more. Invest for the long term, get cost out of the equation, and get diversified to the nth degree.”
“All the trading back and forth each day has been called financial pornography. Paying attention minute to minute, hanging on every word, this is not investing. This is trading on what you think other traders will do. How can you tell who’s right and who’s wrong? It’s a casino. Whether it’s the lottery, or Carnival City, ‘hope’ is not a good investment strategy.”
“Should the market return 7%, and you’re paying 2% to managers and brokers to get that 7, you get 5. [The rest] goes to the croupiers, the managers, the traders and the speculators.”
“The rules are simple. If you don’t save, you will have nothing. Guaranteed. Not investing is not an alternative. I have an age-based rule of thumb: have a bond position that equals your age. If you’re 25, have 25% in bonds, the rest in an index fund. Today, bond yields are so low, so this doesn’t work quite as neatly as it worked for a long time. But it’s simple.”
“This is one of the most important rules of investing. If you never peek from the age of 20 to the age of 70, you’ll rip that first retirement fund statement open at age 70 and I recommend you have a doctor on hand because you’ll go into a dead faint. Your heart might even stop. You’re going to have an amount of money you can’t even imagine.”
“Sometimes the market is valued way higher than the growth line, and sometimes it’s valued way lower. If you could forecast that, you’d sell at the high and buy in at the low. But here’s the thing: I don’t know how to do it. I don’t know anybody who knows how to do that. And I don’t know anybody who knows anybody who knows how to do it. It’s a fool’s game.”
“In this decade, the heavy lifting will have to be done by stocks. If stocks deliver 7%, you’ll have 100% return in 10 years. And there will be bumps! I don’t want to deceive anyone. I can guarantee that there will be at least two or three 20 or 30% bear markets in that time frame. Just assume them. When they happen, just say, ‘I knew that.’”