John Bogle on Strategies for Investors -September 15, 2012

83 year old John Bogle is the author of ten books on investment. Founder of the mutual fund giant, called the Vanguard Group, it is worth revisiting his ten lessons for investors. (The ten lessons are a great summary of the breath of Bogle’s investment experience over six decades.)

Bogle, who was the subject of a high profile article in the New York Times last month under the caption “A Mutual Fund Master, Too Worried to Rest” was quoted as saying, “It’s urgent that people wake up.” Why? This is the worst time for investors that he has seen in after sixty years in the business, that’s saying a lot. Bogle believes that “wise investors won’t try to outsmart the market. They’ll buy index funds for the long-term, and they’ll diversify.”

In his latest outpouring of ideas, in his 11th book The Clash of Cultures: Investment verses Speculation (Wiley and Sons, $29.95), Bogle offered a scathing critique of the financial services industry. He states, “A culture of short-term speculation has run rampant that was dominant earlier in the post-WWII era.” The New York Times article suggests that too much money is aimed at short-term speculation (the seeking of quick profit with little concern for the future). The financial system has been wounded by a flood of so-called innovations that mainly promote hyper-rapid trading, market timing and shortsighted corporate maneuvering. Individual investors are being short changed.

He advocates taxed to discourage short-term speculation. He wants limits on leverage, transparency for financial derivatives, stricter punishments for financial crimes and, perhaps most urgently, a unified fiduciary standard for all money managers. In Bogle’s words, “A fiduciary standard means, basically, put the interests of the client first. No excuses.”

Another interesting facet to Bogle’s persona is that during his peak earning years at Vanguard, he regularly gave half his salary to charities, including two alma maters (The Blair Academy, a prep school in Blairstown, NJ, and Princeton University). He was a scholarship student at both, holding down part-time jobs to help pay his way. At Princeton, in his senior thesis, he sketched the rough outlines of the cost-cutting, share holder-serving company that would become Vanguard. Mr. Bogle continues to make donations to several causes, “my own regret about money is that I don’t have more to give away”, he says.

According to the New York Times, “Despite Vanguard’s size and success, Mr. Bogle is no billionaire. For comparison, Forbes lists the personal wealth of Edward Johnson II who stepped down as Fidelity’s chairman last year, as $5.8 billion. By contrast, Mr. Bogle says his own wealth is in the ‘low double digit millions’. Most of it is in Vanguard and Wellington Mutual Funds, in which he invested via payroll deduction during his long career.”

On the walls of the Vanguard campus, embellished on some murals are excerpts from Bogle’s thoughts:

“Even one person can make a difference.”

“Press on regardless.”

“We lead.”

“Success must not be bought but earned.”

“Stay the course.”

In today’s troubled economic times, investors are being pulled this way and that way about how to invest their money so that they can get a reasonable return. This sentiment would be even more important for the baby-boomers who are entering their golden years. The six decade experience of John Bogle cannot but provide solid and sensible advice. There are perhaps few persons who have his knowledge, breath of experience and, above all, his philanthropic instincts for his fellow countrymen.


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