6 Amazing Investment Lessons from an 88-Year Old Founder of a $4.4 Trillion Investment Company

To many people, the name John Clifford Bogle does not ring a bell. Only a very few people, especially those who watch financial news have heard the name before.
But, many people have heard the company John founded 42 years ago.
In 1975, John founded a company called Vanguard which has more than 20 million investors, 1,500 employees, and more than $4.4 trillion in assets under management. This makes it the second largest investment firm in the world after Blackrock which has more than $6 trillion.

Bogle has written several books which he shares his investment ideas.
Here are the investment rules he advises all people to abide by.

Time is Your Friend

John Bogle believes that if you want to invest in the stock market, the early you start, the better it is for you. In his book, John Bogle on Investing: The First 50 Years, he writes that any person who starts investing in his early 20s will likely have more money than one who starts investing in his late 30s.

According to Bogle, investing in the stock market is not as complicated as many people want to believe. He states that the key to success is to identify good companies that are fairly valued, that have signs of revenue growth, and those that are well-managed.

If you cannot do this type of analysis, Bogle recommends using index funds to invest. Of course, you would expect this kind of opinion from someone who founded Vanguard, the biggest mutual fund in the world.

Ignore Money Managers

Every day, we see money managers advertising their services on television. We also see them sharing their insights on the business section of the news. Bogle is not a fan.

Bogle advises investors to ignore money managers for two reasons. First, they charge high fees for their fees. Most advisors charge clients up to 2% of the invested funds. They then take a 20% cut from the profits.

For people managing billions of dollars, they don’t have the incentive to perform since they can make more than $200 million from the administrative fees alone.

Second, most managers have underperformed the market for years. So, why pay people steep fees to underperform?
For this reason, in a recent letter to shareholders, Warren Buffet said this about Bogle:
‘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.

Instead of money managers, he recommends investing in index funds that charge a little fee with no incentive fee.

Impulse is Your Enemy

According to Bogle, emotions are your number one enemy when investing. In many occasions, emotions will tell you to invest in a company that is trending online. In other times, they will ask you to sell your stakes when a certain level is reached.

In his book, The Clash of the Cultures: Investment vs. Speculation, Bogle advises people to have rational expectations when they make investments and to avoid changing the expectations in response to the noise coming from Wall Street.
Removing emotions from your investment process will make you make decisions which are based on facts and research.

Stick to Simplicity

Money managers want us to believe that investing is difficult. On television, they use jargon like arbitration and yield curve to make their case.

Bogle believes that investment is a simple process where one should allocate capital to stocks, indexes, bonds, and cash reserves for a rainy day.

He believes that an ideal portfolio should have stocks of simple companies that one can understand like Coca-Cola, safe bonds like those of strong companies like Apple, and cash. You will be placing your investment account at risk if you invest in companies you don’t understand.

Another way he recommends is buying low-cost diversified assets like ETFs and indexes.

Stay the Course

In the financial world, markets move up and down all the time. At times, the downward movements like during the economic crisis can take time. As an individual investor, you need to be aware of this and the need for perseverance.

John Bogle advises people to always stay the course and stick to their investment thesis. Exiting difficult investments at the wrong time can lead to significant losses in opportunity. For example, people who exited their investments at the height of the financial crisis missed an opportunity of making good returns after the crisis ended.

Long-Term View

A few years ago, Bogle wrote a book called Don’t Count on It. In this book, he advised people to avoid the allure of day trading but only to make investments with a long-term view. For starters, day trading is the strategy of buying and selling stocks within a few minutes or hours.

Day trading was widespread during the dot-com bubble where most people bought new dot-com companies and exited with a significant profit within hours.

Bogle advises people to avoid this strategy, but buy stocks and indexes with a long-term view. A look at the history of Vanguard shows that it has invested in companies like Coca-Cola and General Motors for decades. These companies have generated huge returns regarding capital gain and dividends.

My Thoughts

I believe that John Bogle is one of the best investors in the world. He has done so much for so many people, yet very few people know about him.

By following his investment advice and principles, you won’t make a lot of money in the short term. Vanguard’s returns pale the averages of some investment firms. However, they are the most consistent for any person looking to generate long-term returns on their money.

There is a lot of wisdom from John Bogle, and I recommend that you read his books, listen to his past speeches and watch his interviews.