John Bogle RECOMMENDS

Being second means to be a loser. In fact, the entire John Bogle’s life – from teenage years to recent times – can be called a fight for being first. Being a desperate supporter of investors’ rights, he would regularly receive lavish words of criticism from his hostilely oriented colleagues, who did not consider an honest attitude to clients as a key to success. “Saint Jack” himself (it’s his nickname given for good deals) showed that being humane while running a business never harms, it helps instead…

20th-century giant in the investment industry

Bogle was aspiring to the acknowledgement of his low-cost investment theory already when he was a student. He considered an opportunity of returning mutuality to mutual funds while choosing the topic of his thesis in Prinston University, from which he graduated with distinction in 1951. Years of practical activities produced results, and after he had occupied a managerial position at Wellington Management Company for a while, he came to conclusions that a “real” mutual fund should be based on a different corporate management method.

John Bogle implemented his managerial ideals in his own project called Vanguard Group, Inc. (as of today the volume of company’s income is 2 billion dollars). Here he was working from 1974 till 1999 (health problems forced him to give up active executive position). But even now he is still involved into activity because he believes that people start to grow old when they slow down. You can still listen to his lectures delivered from Vanguard Group’s Bogle Financial Markets Research Center. But still Fortune magazine listed him as one of top “investment giants of the 20th century” for leading Vanguard (the managerial company) without interfering in a business of mutual funds.

Honorable titles and degrees:

– A Member of Board of Trustees of Blair Academy

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– A Member of Board of Trustees of the National Constitution Center and so forth

– 11 honorable degrees in the field of law, humanitarian sciences and business administration from Prinston University.

Useful books by John Bogle:

– Common Sense on Mutual Funds (1994)

– Common Sense on Mutual Funds. New Imperatives for the Intelligent Investor (1999)

– The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns (2007).

Winning principles of John Bogle:

Legendary honesty of “the father of index funds” towards ordinary investors is the richest thing Bogle possesses. In the financial aspect, his fortune is estimated to the amount of 20 million dollars (wealth of competitors reaches 10 billion dollars). Nevertheless, he’s done a priceless favor to all those investors who would like to earn money while disposing of minimum funds and being quite risk averse…

1. Invest in funds with low turnovers and passive management. The thing is that more progressively developing funds increase profits in a more active way, but as money turnovers grow, risks of an unexpected collapse, a sudden drop after a sharp splash of activity, et cetera grow too. One needs to estimate prospects of an investment object in a long-term outlook (as a rule, rushing enterprises won’t last long).

2. Prefer simplicity in investments. The more difficult the world becomes, the simpler the choice of an investment strategy should be. Here is a free interpretation of just one argument once expressed by Bogle. The more complicated the followed approach is in the investment business, the higher the probability is of choosing a dark road that leads to disappointment.

3. Don’t deal with investments on the stock market if you can’t imagine even 20% losses. Everyone who has already tried oneself in the investment sphere knows that risks of money loss always exist. Depending on the direction you opt for (TM, HYIP, PAMM, mutual funds), losses can be provoked by a certain number of factors. So if you are not ready to lose your money, you’d better save your nerves.

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4. Think reasonably, be attentive. By choosing the investment object, which is supposed to bring profits, don’t neglect hints of your reason. You should not think about the worst end at once. Remember about the use of positive thinking and “choose the fund the same thoroughly as if you would choose a person to manage your assets throughout your entire life”.

5. The minimum expenditures are a decisive factor in choosing an investment object. In Bogle’s working strategy, maximum shortening of expenditure was almost a guarantee of future profits. The fund managed by him is estimated much lower by the level of expenses for its support than others similar to it. To all, your final income = total return from the investment portfolio – charges (transaction fees, consultant payments).

6. Keep your investment expenses under control. This principle is a logical continuation of the previous point. The less money you spend in the course of work (moreover, if you can shorten charges somewhere), the more revenues you will receive in the end. By controlling your expenses, you increase your chances to earn more.

7. Time is your friend, impulse is your enemy. Find some time to investigate potential objects for diversification of deposits. Develop the habit of investing on a regular basis even if the market experiences temporal difficulties. Dismiss emotions and stick to the course if something goes not the way you’ve planned. Unfortunately, forecasts are probability of occurrences, and there is not a single word about guarantees here.

8. Follow the chosen investment strategy. Try to believe that the future promises prospects and no losses. You can make minimum corrections to the main strategy of the game, but it is not allowed to cardinally change it, otherwise you will ruin the whole investment building.

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9. Be aware of stars, beware of “starry” ratings. Bogle advises to possess pieces of information (whenever possible) about people called project managers but not to rely on “starry” ratings that much (like MorningStar). The latter can sooner harm than help.

10. Know the amount of funds, in which you participate. For most investors it is enough to allocate funds in 1-2 funds in order to gain desired profits. According to John Bogle, it does not make sense to have deposits in 4 and more projects because it does not influence the reduction of risks. I think the question about the number of programs is solely individual. The most important thing is to cope with controlling the situation in each of them.

11. Forecast the future of a certain investment fund and estimate its risks based on its past. Facts, theory, indicators of activity are useless. Bogle suggests to focus on makings from the past in order to filter off the “poorest” funds, retain potentially operating and the least risky ones.

12. (1) Be reasonable and (2) be frugal (3) to be active (4) to be skeptical. These rules given in “The Mandate for the shareholders funds” can be considered basic ones for a succeeding businessman in general and an investor in particular. One way or another, success depends on ability of the very player to project his/her savings, tactics, and thoughts to achieving the aim.

John Bogle does not call himself a saint person (and everyone, who does it, is wrong), but using his simple and humanly fair approach to his clients, he earned a positive reputation without proving anything to anyone. It’s unarguable that he is referred to as a famous investor according to his deserts…

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