9 Investing Tips from Investing Icon John Bogle That You Shouldn’t Ignore – The Motley Fool
Posted: March 20, 2020 at 3:44 am
When John Bogle died last year, at the age of 89, the investing world lost a hero. Most investors may not know his name, but he's the founder of Vanguard, one of the most respected financial services companies, known in part for low fees. That's not even his most important accomplishment; he's also known as the father of index funds, and advocated for them for many decades.
Here's a look at nine smart things Mr. Bogle said, along with a little commentary about each.
Image source: Getty Images.
The recent stock market crash has made this abundantly clear. It's important, if you're going to invest in stocks, to understand that the market drops by about 20% or more every few years -- and that after each such drop, it has always recovered and gone on to new highs -- eventually. That sometimes happens within a matter of months, but it might also take years. That's why you only want to invest in stocks with money you won't need for at least five (or more) years.
Consider this: As ofthe middle of 2019, the S&P 500 index of 500 of America's biggest companies outperformed fully 90% of large-cap stock mutual funds over the previous 15 years, according to the folks at Standard & Poor's. In other words, only about 10% of mutual funds run by financial professionals who carefully decide what to buy and sell and when and who focus on large companies are able to deliver above-average results. This is largely due to the fees that they charge. It's common for actively managed stock mutual funds to charge around 1% or more annually, while many index funds that track the S&P 500 charge 0.20%, 0.10%, or even less.
In other words, be a long-term adherent of fundamental investing, where you focus on the companies in which you're a part-owner through your shares, keeping up with their progress and assessing factors such as their market share, profit margins, track record of growth, prospects for further growth, sustainable competitive advantages, debt and cash levels, and so on.
The opposite of this would be jumping in and out of stocks without ever having a solid understanding of the underlying companies, and checking how the stock market and your holdings are doing every day or even every few hours. (I'll concede that when the market has been as volatile as it has been recently, it can be more understandable to take a look more often.)
This is a common mistake that mutual fund investors make, and stock investors make it, too. If you see a mutual fund that soared more than, say, 50% last year, you might jump in, wanting to collect a 50% return yourself. (I made precisely this error once -- and, fortunately, only once.) Well, that's not how it works. Any fund or stock can have an amazing year -- perhaps partly due to investor euphoria and optimism or due to a truly impressive performance. But it doesn't happen every year. And when stocks and funds get ahead of themselves, they're very capable of falling back to more reasonable levels.
Focus on long-term results -- and put more weight on what you expect the company or fund to do in the future than on what it has done in the past.
Image source: Getty Images.
It's underappreciated how important it is to favor mutual funds and other investments with low fees. Here's an example. Imagine three stock mutual funds. One is an index fund charging an annual fee of 0.10%, while the other two charge 1% and 1.5%. If the stock market averages 10% growth over a given period, you'll end up with average annual gains of 9.9%, 9%, and 8.5%, respectively, with those funds. Here's how $10,000 annual investments would grow over time at those rates:
Investing Period
Balance Assuming 8.5% Growth
Balance Assuming 9% Growth
Balance Assuming 9.9% Growth
10 years
$160,961
$165,603
$174,315
20 years
$524,891
$557,645
$622,348
30 years
$1.35 million
$1.49 million
$1.78 million
Source: Calculations by author.
The cost of expenses is clear in the table above -- and remember that some funds or investments charge significantly more than 1.5% annually, too. Emotion, though, is another challenge for investors to overcome. Think about the recent big market drops. They tend to lead many people to panic and sell their stocks (which causes the stock prices to fall further). Market drops are actually great buying opportunities for long-term investors.
As Warren Buffett has explained about his own (wildly successful) investing style: "We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."
Simplicity is often best. Many people think about investing and assume they need to learn all about commodities and futures and options and that they have to become experts at reading financial statements in order to study many companies. Instead, think back to Bogle's simple index funds. You can just park money in one or more index funds regularly for many years and do very well -- without becoming a stock market expert.
When you invest in a broad-market index fund, such as one that tracks the whole U.S. stock market, as the ultra-low-fee Vanguard Total Stock Market ETF(VTI)does, it lets you skip looking for the most promising stocks among thousands -- because you just buy into all the thousands.
Finally, if you become an index investor, you just have to stick to the plan. Keep investing in it for many years, without panicking and selling.
There's a lot more we can learn from John Bogle -- and we have a lot to be grateful to him for, as well.
View post:
9 Investing Tips from Investing Icon John Bogle That You Shouldn't Ignore - The Motley Fool
- SoundCloud Gets Investment From Union Square, Index [Last Updated On: January 9th, 2011] [Originally Added On: January 9th, 2011]
- Return On Investment (ROI) Definition | Investopedia [Last Updated On: September 14th, 2015] [Originally Added On: September 14th, 2015]
- Investing News - Investment Articles - Investing Research [Last Updated On: September 14th, 2015] [Originally Added On: September 14th, 2015]
- InvestmentNews - The Investing News Source for Financial ... [Last Updated On: September 14th, 2015] [Originally Added On: September 14th, 2015]
- Investment management - Wikipedia, the free encyclopedia [Last Updated On: September 14th, 2015] [Originally Added On: September 14th, 2015]
- Investment - Wikipedia, the free encyclopedia [Last Updated On: September 14th, 2015] [Originally Added On: September 14th, 2015]
- Investment Education & Advice for Investors - Investment U [Last Updated On: September 14th, 2015] [Originally Added On: September 14th, 2015]
- Forbes - Investing Information and Investing News - Forbes.com [Last Updated On: September 15th, 2015] [Originally Added On: September 15th, 2015]
- Fidelity Investments - Retirement, Funds, and Online Trading [Last Updated On: September 15th, 2015] [Originally Added On: September 15th, 2015]
- Investment | Define Investment at Dictionary.com [Last Updated On: September 15th, 2015] [Originally Added On: September 15th, 2015]
- Investment Definition | Investopedia [Last Updated On: September 15th, 2015] [Originally Added On: September 15th, 2015]
- Find what type of investment is right for you - INVESTMENTS [Last Updated On: September 15th, 2015] [Originally Added On: September 15th, 2015]
- Investopedia - Educating the world about finance [Last Updated On: September 20th, 2015] [Originally Added On: September 20th, 2015]
- Investment, Mutual Funds, ETFs & Stocks | Bankrate.com [Last Updated On: September 26th, 2015] [Originally Added On: September 26th, 2015]
- Gold as an investment - Wikipedia, the free encyclopedia [Last Updated On: October 4th, 2015] [Originally Added On: October 4th, 2015]
- Green Card Through Investment | USCIS [Last Updated On: January 22nd, 2016] [Originally Added On: January 22nd, 2016]
- What is Investment ? Meaning and Types of Investment [Last Updated On: January 22nd, 2016] [Originally Added On: January 22nd, 2016]
- Host.al - Albanian Domain AL Accredited Registrar [Last Updated On: January 22nd, 2016] [Originally Added On: January 22nd, 2016]
- Alpha Investment Plan - Alpha Bank Albania [Last Updated On: January 22nd, 2016] [Originally Added On: January 22nd, 2016]
- RealEstate.al - Apartment-Villa-Office For rent or for sale ... [Last Updated On: January 22nd, 2016] [Originally Added On: January 22nd, 2016]
- Attractiveness of foreign investments in Albania [Last Updated On: January 22nd, 2016] [Originally Added On: January 22nd, 2016]
- INVESTMENT CLIMATE | Embassy of the Republic of Albania in Japan [Last Updated On: January 22nd, 2016] [Originally Added On: January 22nd, 2016]
- Princip.al :: Welcome to Princip.al [Last Updated On: January 22nd, 2016] [Originally Added On: January 22nd, 2016]
- Foreign direct investment - Wikipedia, the free encyclopedia [Last Updated On: January 22nd, 2016] [Originally Added On: January 22nd, 2016]
- Investment Moats Wealth Mentor for Financial Independence [Last Updated On: January 22nd, 2016] [Originally Added On: January 22nd, 2016]
- Investment | Nicole Gesmondi Photographer, LLC [Last Updated On: January 22nd, 2016] [Originally Added On: January 22nd, 2016]
- investment - Thesaurus.com [Last Updated On: January 22nd, 2016] [Originally Added On: January 22nd, 2016]
- What is Investment? | eHow [Last Updated On: January 22nd, 2016] [Originally Added On: January 22nd, 2016]
- Investment banking - Wikipedia, the free encyclopedia [Last Updated On: January 22nd, 2016] [Originally Added On: January 22nd, 2016]
- Investment Jobs on CareerBuilder.com [Last Updated On: January 22nd, 2016] [Originally Added On: January 22nd, 2016]
- Articles about Investment - timesofindia-economictimes [Last Updated On: January 22nd, 2016] [Originally Added On: January 22nd, 2016]
- Investment Definition - What is Investment? [Last Updated On: January 22nd, 2016] [Originally Added On: January 22nd, 2016]
- Investing Basics | Investor.gov [Last Updated On: January 22nd, 2016] [Originally Added On: January 22nd, 2016]
- Investing.com - Stock Market Quotes & Financial News [Last Updated On: January 22nd, 2016] [Originally Added On: January 22nd, 2016]
- Best Investments Good Investments in 2015 and Beyond [Last Updated On: January 22nd, 2016] [Originally Added On: January 22nd, 2016]
- Investment Calculators [Last Updated On: January 22nd, 2016] [Originally Added On: January 22nd, 2016]
- Investment: a key concept in Economics [Last Updated On: January 22nd, 2016] [Originally Added On: January 22nd, 2016]
- SEC.gov | Investment Companies [Last Updated On: January 22nd, 2016] [Originally Added On: January 22nd, 2016]
- Careers-in-Investment-Banking.com: Your Guide to ... [Last Updated On: February 8th, 2016] [Originally Added On: February 8th, 2016]
- Investment Property and Investment Real Estate For Sale [Last Updated On: February 8th, 2016] [Originally Added On: February 8th, 2016]
- Investment and Sustainable Development [Last Updated On: February 16th, 2016] [Originally Added On: February 16th, 2016]
- Investment Images - Photos - Pictures - CrystalGraphics [Last Updated On: February 16th, 2016] [Originally Added On: February 16th, 2016]
- Investment - Simple English Wikipedia, the free encyclopedia [Last Updated On: February 20th, 2016] [Originally Added On: February 20th, 2016]
- Types of Investments - MoneySENSE [Last Updated On: February 20th, 2016] [Originally Added On: February 20th, 2016]
- Smart Ways to Invest Your Money and Minimize Risks [Last Updated On: February 22nd, 2016] [Originally Added On: February 22nd, 2016]
- Investing in Mining Stocks, Metals and Commodities ... [Last Updated On: February 22nd, 2016] [Originally Added On: February 22nd, 2016]
- What is Investment Banking? (with picture) [Last Updated On: February 22nd, 2016] [Originally Added On: February 22nd, 2016]
- Investments - The New York Times [Last Updated On: March 17th, 2016] [Originally Added On: March 17th, 2016]
- investment - English-Spanish Dictionary - WordReference.com [Last Updated On: March 20th, 2016] [Originally Added On: March 20th, 2016]
- Investment fund - Wikipedia, the free encyclopedia [Last Updated On: March 20th, 2016] [Originally Added On: March 20th, 2016]
- What Is An Investment Bank - An Intro To Investment Banks [Last Updated On: May 10th, 2016] [Originally Added On: May 10th, 2016]
- Investment Property Advisors - Home [Last Updated On: May 10th, 2016] [Originally Added On: May 10th, 2016]
- Investment Savings Bank [Last Updated On: May 10th, 2016] [Originally Added On: May 10th, 2016]
- US Investment Report [Last Updated On: May 10th, 2016] [Originally Added On: May 10th, 2016]
- Investment House [Last Updated On: May 10th, 2016] [Originally Added On: May 10th, 2016]
- Best investments - 10 steps to investing money | uSwitch [Last Updated On: May 17th, 2016] [Originally Added On: May 17th, 2016]
- investment - The Motley Fool [Last Updated On: May 17th, 2016] [Originally Added On: May 17th, 2016]
- How to Invest Small Amounts of Money Wisely: 12 Steps [Last Updated On: May 17th, 2016] [Originally Added On: May 17th, 2016]
- Investing with us | HSBC UK [Last Updated On: May 17th, 2016] [Originally Added On: May 17th, 2016]
- Investment Risks | Consumer Information [Last Updated On: June 27th, 2016] [Originally Added On: June 27th, 2016]
- Invest In Shipping Containers | Invest Containers [Last Updated On: July 1st, 2016] [Originally Added On: July 1st, 2016]
- Investment - Trade - European Commission [Last Updated On: July 10th, 2016] [Originally Added On: July 10th, 2016]
- investment | finance | Britannica.com [Last Updated On: August 15th, 2016] [Originally Added On: August 15th, 2016]
- What does investment mean? definition, meaning and ... [Last Updated On: August 17th, 2016] [Originally Added On: August 17th, 2016]
- Investment Options | Investment Plans in India | Online ... [Last Updated On: August 17th, 2016] [Originally Added On: August 17th, 2016]
- Investment Returns [Last Updated On: August 17th, 2016] [Originally Added On: August 17th, 2016]
- The Mental Health Benefits of Exercise: The Exercise ... [Last Updated On: July 8th, 2017] [Originally Added On: July 8th, 2017]
- PayPal co-founder launches firm to raise investment funds for SpaceX, report says - Los Angeles Times [Last Updated On: July 30th, 2017] [Originally Added On: July 30th, 2017]
- Bitcoin Investment Vehicle Adopts Open Strategy Ahead of Blockchain Fork - CoinDesk [Last Updated On: July 30th, 2017] [Originally Added On: July 30th, 2017]
- How to Spot a Good Investment in a Changing Neighborhood - Mansion Global [Last Updated On: July 30th, 2017] [Originally Added On: July 30th, 2017]
- SoftBank Vision Fund investments so far - CNBC.com - CNBC [Last Updated On: July 30th, 2017] [Originally Added On: July 30th, 2017]
- Vanguard's new chief investment officer has a warning for investors - The Denver Post [Last Updated On: July 30th, 2017] [Originally Added On: July 30th, 2017]
- MARKET MATTERS: When life throws a curveball at your investment timeline - New Haven Register [Last Updated On: July 30th, 2017] [Originally Added On: July 30th, 2017]
- Investment prosperity can make investors complacent - The Seattle Times [Last Updated On: July 30th, 2017] [Originally Added On: July 30th, 2017]
- Risky business: Keeping an eye on Chinese investment - POLITICO.eu [Last Updated On: July 30th, 2017] [Originally Added On: July 30th, 2017]
- Somaliland secures record $442m foreign investment deal - CNN [Last Updated On: August 2nd, 2017] [Originally Added On: August 2nd, 2017]
- China isn't discouraging overseas investment, only regulating it, Beijing-backed think tanker says - CNBC [Last Updated On: August 2nd, 2017] [Originally Added On: August 2nd, 2017]
- China issues rules to curb state firms' overseas investment risks - Reuters [Last Updated On: August 2nd, 2017] [Originally Added On: August 2nd, 2017]
- Unilever's Latest Investment Targets New Route into Homes - Fortune [Last Updated On: August 2nd, 2017] [Originally Added On: August 2nd, 2017]
- Hundreds of jobs, $139 million investment planned in Morgan County by major companies - whnt.com [Last Updated On: August 2nd, 2017] [Originally Added On: August 2nd, 2017]