The ‘Father of index tracking’, John Bogle, died on January 16th at the age of 89.
Bogle, was the founder of the world’s second biggest fund manager Vanguard, which currently administers c. $5 trillion, was also chosen as one of the ‘Four Giants of the 20th Century’ including Warren Buffet, George Soros and Peter Lynch.
The remarkable about the Vanguard Group is its shareholder structure. Vanguard’s shareholders are the Vanguard funds, respectively their investors.
During his decades of investment experience, Bogle provided various tips which were published in an article in 2017:
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
A 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.