An essay by Vanguard founder John Bogle, published in a recent issue of the CFA Institute’s Financial Analysts Journal, offers insights and guidance concerning the need for balance between professional values and business values in the world of investing and finance. This is the third installment of a five-part series outlining highlights of the essay.

Bogle uses the examples of Adam Smith and Benjamin Graham, trailblazers in professional investing, to illustrate the evolution of the industry:

Smith, whose book Theory of Moral Sentiments in 1759, highlights the importance of prudence in business dealings: “The care of…the fortune…is considered as the proper business of that virtue which is commonly called Prudence…Security, therefore, is the first and the principal object.” Bogle reveres Smith, asserting his belief that he “set the standard for our own aspirations as prudent professionals.”

In his 1949 book The Intelligent Investor, Bogle writes, Graham describes two types of investors: (1) “the conservative defensive investor, emphasizing the avoidance of serious losses; and (2) the aggressive, enterprising investor who is willing to devote time and care to the selection of sound securities.

On the conservative side, Smith advocates for investors relying on an “adviser of a mutual fund” to look at results over a “moving five-year average period” to gauge performance, and drives home the point that such an investor must be “armed with mental weapons”, and “immune to optimism or pessimism.”