Seven investment tips by John Bogle

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John Bogle became famous as the very first founder of a tracker fund. Here are his most important basic rules of investment in seven short tips.

Seven investment tips by John Bogle
  • Level: For beginners
  • Reading duration: 5 minutes
John Bogle's 7 tips
Learn from the best. This goes for most parts of life, and for investing as well. John C. Bogle could rightly call himself one of the best. In 1999, he was chosen to be one of the four “Giants of the 20th Century”, alongside with Warren Buffett, George Soros and Peter Lynch. The “Father of the tracker funds” was the founder of the investment company “The Vanguard Group”, which he was president of for several years. Today, this investment company is the world’s second largest fund manager, administering a total of 4.9 trillion US-Dollars. The remarkable about the Vanguard Group is its shareholder structure. Vanguard’s shareholders are the Vanguard funds, respectively their investors.
These are the most important tips for investing that Bogle had gathered in his decades of experience in the capital markets. Bogle published them in an article for the CFA Institute 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 other.
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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.
The full article by John Bogle can be read in the CFA Financial Analyst Journal.
John Bogle died in Pennsylvania, USA, on January 16th 2019 at the age of 89. The investor Warren Buffett paid tribute to him in an interview on CNBC on U.S. television and said: "John has done more for the entirety of American investors than anyone else I know."
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