12 Investing Rules from Jack Bogle

This week, we will be revisiting some of our previous posts on John “Jack” Bogle, who passed away today. R.I.P Jack.

Jack did more for American investors as a whole than any individual I’ve known.

If a statue is ever erected to honor the person who has done the most for American investors, the hands down choice should be Jack Bogle. For decades, Jack has urged investors to invest in ultra-low-cost index funds. In his crusade, he amassed only a tiny percentage of the wealth that has typically flowed to managers who have promised their investors large rewards while delivering them nothing – or, as in our bet, less than nothing – of added value. In his early years, Jack was frequently mocked by the investment-management industry. 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.

-Warren Buffett

Below is a post we originally published in 2013, looking at an interview Bogle did with Men’s Health Magazine:

What are the secrets to long term investing success? No one better to ask than Jack Bogle, founder of Vanguard, creator of the index fund and orator of my favorite investing quote, which can be viewed from an old CNBC interview, here:

Bogle Comments on the Markets from CNBC.

“Don’t just do something — Stand there!”

The following is in the May 2013 edition of Men’s Health magazine:

1. Forget “the market”

Bogle says: “When we 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.”


2. Understand your role

Bogle says: “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 manage 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.”

Our take: For those of you who have signed up for our newsletter and received our free eBook, you have seen the numbers. A majority of mutual funds lose to the general market. For most investors, owning the broad based index funds is not only the easiest option available, but the best!

3. Don’t kid yourself

Bogle says: “I ask people: what is the intellectual basis for indexing? Reduce costs 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.”


4. Seek Boredom

Bogle says: “I look at indexing is being simple and, sad to say boring. Be bored by the process but elated by the outcome. In Vegas, it’s the opposite. You 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.”

Our take: The Vegas analogy is one we have used before here on Begin To Invest. If you want excitement, take your money to Vegas. Remember if an investment can make you rich in a day, it can also (and will probably) make your broke in a day.

5.Think ahead. Way ahead

Bogle says:
” It’s foolishness think you can beat the market. There are only two things working here: How did it much 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.”

Our take: The magic of compounding interest works best the longer you give it. Remember, you are saving now for money to spend decades down the road in retirement. Don’t worry about what the value of the account will be tomorrow.

6. Forget “the Number”

Bogle says:“There used to be a company reported to tell you ‘the number’ [how much you need to retire]. It’s more complex than that. It’s what those dollars are worth and 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.”

Our take:  I have  talked about “the number” several times here on Begin To Invest. I think its important to have an idea of money that you will need during retirement based on estimated expenses. Don’t don’t get infatuated with that number, especially early on.

7. Invest. Don’t trade

Bogle says:
“All the trading back and forth each day and called financial pornography. Paying attention minute to minute, hang 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.”

Our take: Amen. Just in our last post we talked specifically about what some people call “investing” is really nothing more than “betting”. Don’t bet your life savings, invest it.

8.Do some math

Bogle says:
“Should the market return 7%, and you’re paying 2% to managers and brokers to get that seven, you get five. [The rest] goes to the croupiers on Wall Street, the managers, the traders, the speculators.”

Our take: (Insert graph of 7% return vs 5% return here) Fees add up over time. A one time $1,000 investment today that grows at 7% will become nearly $30,000 50 years from now. Compare that to a reduced 5% return over 50 years, which becomes only $10,000. That’s $20,000 you are giving to Wall Street instead of keeping for yourself.

9. Keep it simple

Bogle says:
“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, this doesn’t work quite as neatly as it worked for a long time. But it simple.”

Our take: This sort of goes with rule number 4 – seek boredom.

10. Don’t Peek at Statements

Bogle says:
“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 401K statement open at age of 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.”

Our take: This might be a little extreme for most. Although it is most certainly true, just investing a small amount leads to a large sum over long periods of time.

11. Know your limitations

Bogle says:
“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 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.”

Our take:

12. Don’t panic, be cool

Bogle says:
“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 be deceiving anyone. I can guarantee there will be at least two or three 20 to 30% bear markets in that time frame. Just assume them. When I happen, just say, “I knew that.””

Our take: “Don’t just do something – Stand there!”

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