Vanguard Mutual Funds Founder

The Late Jack Bogle’s 10 Investment Principals

With DYI’s Commentary

1.)  Reversion to the mean

Over time, the market will return to its average, so it's not a good idea to pick funds based on yesterday's winners.

DYI:  Chasing the latest hot performing fund is prescription for long term poor performance as what invariably occurs a misstep will happen driving down the return back to the long term average of the market in general (and possibly worse).   

2.)  Time is your friend

Start investing early, stick to a plan, and don't pay attention to daily market news.

DYI:  I actually advocate young people to save as much money for retirement to the exclusion of purchasing their first house.  Why?  Time is your friend when you are young and your enemy when you have passed the 40 year old mark.  Simply more time to compound and more you are able to put in early will help tremendously before all the costs of household formation comes into play.

3.)  Buy right and hold tight

Once you've set your asset allocation, don't change it based on market fluctuations.

DYI:  John Bogle does mention in his book – Bogle on Mutual Funds 1994 – Chapter Twelve – The Allocation of Investment Assets beginning page 235 – changing your allocation between stocks to bond ratio.  His determination for any change is based upon – drum roll please – VALUATIONS!

See DYI's Benjamin Graham Corner

 https://dividendyieldinvestor.blogspot.com/p/ben-ii.html 

4.)  Realistic expectations

Returns in the coming decade are likely to be lower than in the past.

DYI:  Once again – as of 12-9-2024 – the U.S. Stock Market is so severely “jacked up” returns going forward over the next 10 years will be sub atomically low (less than the rate of inflation) or outright losses depending on your allocation.   

5.)  Buy the haystack

Instead of buying individual stocks or stock funds, invest in broad-based index or exchange-traded funds to reduce risk.

DYI:  I don’t see the need for any more than three funds at the maximum nor is it required.  If a very conservative investor or due to insanely high valuation the Vanguard’s Wellesley Income Fund – (35% stocks – 65% bonds) – will do just fine.   

6.)  Minimize fees

Invest in low-cost, low-turnover funds to increase your return.

DYI:  After looking at 401k plans till I’m blue in the face I’ve come to the conclusion the best thing to do is only the match after that set up with Vanguard an automatic method of investing.  Why?  The vast majority of these corporate plans have 2% expense ratio as compared to Vanguard’s S&P 500 index fund at 0.04%!  That is a 98% decline in costs to run the fund!  Vanguard’s Wellesley Income Fund (non-index)** expense ratio is 0.16%!    

7.)  Risk is unavoidable

There's no wealth without risk, so you should save and invest for retirement to avoid depleting your savings with inflation.

DYI:  Inflation is the biggest tax that you will pay even beyond death.  Funeral costs have soared right in line with inflation! 

8.)  Don't fight the last war

Avoid the temptation to sell when markets fall and buy when they rise based on your emotions.

DYI:  Individuals who are very risk adverse then the Wellesley Income Fund is their only fund of choice no matter what the current valuation level is.  If it is this fund as compared to doing nothing at all the choice is obvious.  

9.)  Skepticism towards active management

Bogle was skeptical of active management strategies, which often promise high returns based on the manager's skill.

DYI:  Over broad periods of time measured in decades your asset allocation – stocks, bonds, or gold/silver if invested based upon correct use of valuation will out perform any hot manager past or present (except for late Benjamin Graham or Warren Buffett).     

10.)  Simple, cost-efficient, and diversified

Bogle advocated for an investment approach that mirrors the market's returns over the long term.

**After studying Vanguard’s actively managed funds they are closet indexers who make buy and sell decisions only on the margins attempting to add value to the overall portfolio.  Even with that their portfolio turnover is SIGNIFICANTLY lower as compared to their peers.  In other words the portfolio changes when their core positions (closet indexer) rise or decline significantly thus increasing or decreasing but never abandoning the stock.