OVERVIEW
John C. “Jack” Bogle, 84, has influenced your life in a major way—assuming you have a retirement fund or have 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 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.) Want to retire with a pile of dough? Then read on.
FORGET “THE MARKET”
“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.”
UNDERSTAND YOUR ROLE
“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.”
DON’T KID YOURSELF
“I ask people: What is the intellectual basis for indexing? Reduce cost and you maximize 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 realized in the long run.”
SEEK BOREDOM
“I look at indexing as being simple and, sad to say, boring. Be bored by the process but elated by the outcome. In Vegas, 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.”
THINK AHEAD. WAY AHEAD
“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.” (Still think you can win? Then find out How to Pick Stocks That Soar.)
FORGET “THE NUMBER”
“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 those dollars are 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.”
INVEST, DON’T TRADE
“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 Wall Street, the lottery, or Las Vegas, ‘hope’ is not a good investment strategy.”
DO SOME MATH
“Should the market return 7 percent, and you’re paying 2 percent to managers and brokers to get that 7, you get 5. [The rest] goes to the croupiers on Wall Street, the managers, the traders, the speculators.”
KEEP IT SIMPLE
“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 percent 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.” See how you can Save More, and Earn More.
DON’T PEEK AT STATEMENTS
“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 401(k) 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.”
KNOW YOUR LIMITATIONS
“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.”
DON’T PANIC, BE COOL
“In this decade, the heavy lifting will have to be done by stocks. If stocks deliver 7 percent, you’ll have 100 percent 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 percent bear markets in that time frame. Just assume them. When they happen, just say, ‘I knew that.'”
