John Bogle’s 10 Rules of Investing

I missed this piece on CBS Money Watch last week and wanted to pass it along in case you did as well.  It lists John Bogle’s 10 rules of investing.  Bogle is truly a living legend so his insights are a great addition to some other “rules lists” that I’ve compiled below:

“1. Remember reversion to the mean. What’s hot today isn’t likely to be hot tomorrow. The stock market reverts to fundamental returns over the long run. Don’t follow the herd.

2. Time is your friend, impulse is your enemy. Take advantage of compound interest and don’t be captivated by the siren song of the market. That only seduces you into buying after stocks have soared and selling after they plunge.

3. Buy right and hold tight. Once you set your asset allocation, stick to it no matter how greedy or scared you become.

4. Have realistic expectations. You are unlikely to get rich quickly. Bogle thinks a 7.5 percent annual return for stocks and a 3.5 percent annual return for bonds is reasonable in the long-run.

5. Forget the needle, buy the haystack. Buy the whole market and you can eliminate stock risk, style risk, and manager risk. Your odds of finding the next Apple (AAPL) are low.

6. Minimize the “croupier’s” take. Beating the stock market and the casino are both zero-sum games, before costs. You get what you don’t pay for.

7. There’s no escaping risk. I’ve long searched for high returns without risk; despite the many claims that such investments exist, however, I haven’t found it. And a money market may be the ultimate risk because it will likely lag inflation.

8. Beware of fighting the last war. What worked in the recent past is not likely to work going forward. Investments that worked well in the first market plunge of the century failed miserably in the second plunge.

9. Hedgehog beats the fox. Foxes represent the financial institutions that charge far too much for their artful, complicated advice. The hedgehog, which when threatened simply curls up into an impregnable spiny ball, represents the index fund with its “price-less” concept.

10. Stay the course. The secret to investing is there is no secret. When you own the entire stock market through a broad stock index fund with an appropriate allocation to an all bond-market index fund, you have the optimal investment strategy. Discipline is best summed up by staying the course.”

And a few more lists here:

And never forgets Warren Buffett’s rules of investing.  Rule #1 – Never lose money.  Rule #2 – Never forget rule #1.


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Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • Gordon Amgott

    I agree wholeheartly with this article. I have been investing for over 30 years. Much is common sense and keeping your emotions out of

  • SS

    Great list. Thanks for posting.

  • Bond Vigilante

    11. History doesn’t repeat itself. It rhymes.
    12. Any one who fails to learn from the past is bound to make the same mistakes over and over again.

  • ES71

    I think all 10 can be summed up as – invest in an index fund. It works most of the time. except when it doesn’t (when market goes down 405 in 1 month).

  • ES71

    I mean down 40%.

  • Johnny Evers

    Would index investing work if everybody was an index investor?

    One way to look at this is through the Burger King location strategy. While McDonalds puts a lot of time and money into finding optimal locations, what Burger King does is follow McDonalds around a build across the street.
    What an index investor does is watch where others put their money and then does the same at lower costs.
    Don’t get me wrong — index investing works, but you are piggybacking on the efforts of others.

    It’s also worth nothing that what index investing does is narrow your range of outcomes. You are the index. Now somebody else may beat you with a narrow group of stocks and somebody else may trail you.

  • Tom Brown

    Here’s another investing idea based on variable annuity loopholes:

    So basically the formula is:

    1) Find someone on the brink of death that agrees to be an “annuitant” for a nominal fee.

    2) Take 50% of your money and invest in (through the annuity) crazy aggressive funds (like those iShares funds that go up 4x what the S&P does).

    3) Take the other half and invest in crazy pessimistic funds (again, iShares that go up 4x the amount the S&P goes *down*)

    Sit back and relax… as long as your annuitant isn’t long for this world, you can’t lose!!

    …uh, that is until the FBI indicts you… for exactly WHAT it’s still not clear. Seems like the guy obeyed all the laws to me!

    …of course the insurance companies realized their mistake now and have closed that particular loophole, so we’ll have to find another one!

  • Andrea Malagoli

    These principles are a bit dates. John Bogle became a legend because he promoted passive index investing in the middle of the largest bull market in history. His ideas have been failing for a while, and in fact they have been part of the reason why many people came into 2008 unprepared.

    The idea that the long term takes care of things is a myth.