Jack Bogle's 10 Investing Principles -- (John Bogle Founder of Vanguard)
These are Jack Bogle's 10 investing rules for success. John C Bogle, known to his friends as Jack is the founder of Vanguard. The company which gave birth to the very first index fund.
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Jack launched Vanguard with only $1.5 Billion of AUM. Amazingly, for nearly 20 years, Vanguard struggled but Jack Bogle kept on his mission to educate investors on the power of indexing. Over the last 2 decades, index fund investing at Vanguard has exploded to $6.7 Trillion of assets under management.
Jack Bogles 10 Investing Rules
1. Remember Reversion to the Mean. Selecting your fund from yesterday’s winners is not smart. Over the long term, reversion to the market average is inevitable.
2. Time is Your Friend. Start early, stick to a plan and ignore all the noise. Let the miracle of compound interest work for you.
3. Buy Right and Hold Tight. Once you set your asset allocation, ignore the moves in the market. You can't time the market peaks and troughs. Stick to the plan.
4. Have Realistic Expectations. Rates of return in the coming decade are likely to be lower than the last. A 7% annual return before costs and inflation for stocks and a 2.5% return for bonds before costs and inflation is reasonable.
5. Forget the Needle, Buy The Haystack. Don’t take the risk of buying individual stocks. Cut your risk by investing in a broad-based index or ETF.
6. Minimize the Croupier’s Take. Every time something is bought and sold a middle-man takes a slice. Minimize fees by investing in low-cost, low turnover funds. This increases your return.
7. There’s No Escaping Risk. There’s no wealth without risk. If you don’t invest, you’ll end up with nothing. And your savings will be depleted by inflation.
8. Don’t Fight the Last War. What worked in the past is no predictor of what will work in future. Past performance does not mean future performance. Past fund managers will likely not be the best future fund managers.
9. The Hedgehog Beats the Fox. Foxes know many things. They represent financial institutions that sell complicated products and charge high fees for advice. A hedgehog knows one thing and when threatened — they curl up into a spiny ball. Simple, but effective, like an index fund.
10. Stay the Course. The secret to successful investing isn’t forecasting or good stock picking. It is about making a plan, sticking to it, eliminating unnecessary risks, and keeping your costs low. Whatever happens, you must stay the course.
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