FREE NEWSLETTER
Go to main Forum page »
I just responded to a post by norm60189. He mentioned that Jack Bogle popularized index funds. My post got me thinking about my favorite Bogle quotes. Here are three, with my interpretation of the saying.
“Don’t look for the needle in the haystack. Just buy the haystack!”
Research has shown that annually the majority of active managers do not eat the market. As a result investors are better off not trying to pick individual stocks but buying broad market indexes.
“Don’t do something — just stand there.”
Research in general has shown the more an investor trades the poorer the returns.
Bogle was famously not a fan of ETFs. Why? It was because the structure would result in investors trading more. Ironically ETFs have been a hit with Vanguard investors as it is only slightly behind BlackRock in ETF assets under management.
“You get what you don’t pay for”/ “Costs Matter”
Research has shown the most accurate predictor of future fund performance is low fees ie expense ratios and thus cheaper funds consistently outperform more expensive ones over time.
All three quotes are great choices. Warren Buffett said Jack Bogle “did more for American investors as a whole than any [other] individual I’ve known.” In his 2016 annual letter, Buffett wrote:
“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. For decades, Jack has urged investors to invest in ultra-low-cost index funds. In his crusade, he amassed only a tiny percentage of the wealth that has typically flowed to managers who have promised their investors large rewards while delivering them nothing – or, as in our bet, less than nothing – of added value. In his early years, Jack was frequently mocked by the investment-management industry. Today, however, he has the satisfaction of knowing that he helped millions of investors realize far better returns on their savings than they otherwise would have earned. He is a hero to them and to me.”
Note: I think the second quote is slightly different: “Don’t just do something, stand there”
— worded so it would echo more closely the more familiar “Don’t just stand there, do something.”
1PF: Correct on the correction 😳
The second quote is my favorite. I had a client who always used to thank me for “talking him off the ledge.”
I wish I could send this post to my younger self.
There’s something I’d add: these principles work together. Low-cost index investing minimizes trading (principle 2) and costs (principle 3) while capturing market returns (principle 1). They form an elegant, simple investment philosophy most would do well following.