John Clifton "Jack" Bogle — founder and former chief executive of The Vanguard Group — gives five simple principles for investing at the World Affairs Council of Philadelphia event in 1997.
Five Principles for Investing
Invest you must.
The biggest risk is the long term risk of not putting your money to work. Never think you know more than the market does. You're apt to be wrong if you do.Give yourself all the time you can.
Compound interest is a miracle. Time is your friend.Have rational expectations about future returns.
In good times and bad times alike, this too shall pass away. Your emotions can kill you. Impulse is your foe.Rely on simplicity.
Basic investing is simple. Remember sensible asset allocation, middle-of-the-road selection, careful balancing of risks and returns, and costs (of excessive trading, active fund management etc) which can kill long-run returns.Stay the course.
No matter what happens, stay the course.
Bogle about Graham
In his Foreword to the 2005 reprint of The Intelligent Investor, Bogle writes of the book's author and Warren Buffett's mentor — Benjamin Graham — that:
"The basic principles of intelligent investing that [Graham] set forth... have remained virtually intact and unassailable."
Parallels with Buffett and Graham
There are many similarities in the investment principles of Bogle and those of Warren Buffett, who Bogle himself refers to in the above talk; as well as those of Benjamin Graham.
For starters, Bogle and Graham have expressed very similar views on the issue of Timing vs Pricing in investing.
Index Funds — which Bogle is credited with the creation of — were also the very first of the investment strategies recommended by Graham.
Shall Pass
Interestingly, the adage in Bogle's principle #3 above is also referred to by Graham in framing his own "central concept of investment".
"In the old legend the wise men finally boiled down the history of mortal affairs into the single phrase, “This too will pass.” Confronted with a like challenge to distill the secret of sound investment into three words, we venture the motto - Margin of Safety."
Middle Path
Graham too wrote of the value of following the middle path, as mentioned in principle #4 above, that:
"When Phaëthon insisted on driving the chariot of the Sun, his father, the experienced operator, gave the neophyte some advice which the latter failed to follow—to his cost. Ovid summed up Phoebus Apollo’s counsel in three words:
Medius tutissimus ibis
You will go safest in the middle courseI think this principle holds good for investors and their security analyst advisers."
Staying The Course
Finally, with regard to staying the course, as mentioned in principle #5 above:
"In the world of securities, courage becomes the supreme virtue after adequate knowledge and a tested judgment are at hand."
"The wisdom of having courage in depressed markets is vindicated not only by the voice of experience but also by application of plausible techniques of value analysis."
Read the Twelve Commandments by Philip Carret and the Sixteen Factors by Walter Schloss.
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Submitted by GrahamValue. Created on Wednesday 6th November 2019. Updated on Friday 30th December 2022.