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 last installment of our series outlining highlights of the essay.
Bogle outlines some of the advice he has offered his clients over the years:
- Invest you must. Bogle says that the failure to earn a sufficient return is a bigger risk than short-term volatility in the market.
- Time is your friend. Start investing as early as possible to enjoy the “magic of compounding returns.”
- Impulse is your enemy. “Eliminate emotion from your investment program.”
- Basic arithmetic works. Pay attention to investment expenses that can eat into returns.
- Stick to simplicity. Focus on maintaining a “sensible” allocation among stocks, bonds, and cash reserves.
- Never forget reversion to the mean. “Strong performance by a mutual fund is highly likely to revert to the stock market norm—and often below it.”
- Stay the course. “Regardless of what happens in the markets, stick to your investment program.”
Bogle concludes with a warning to investors: “Do not let false hope, fear, and greed crowd out good investment judgement.”