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:

• Timeless investing lessons
• 6 Investing Rules by Michael Steinhardt
• Bob Farrell’s 10 rules
• 7 Rules by Howard Marks
• Richard Bernstein’s 10 Guidelines
• 8 Investment Lessons from Bruce Berkowitz
• Guru Investing Philosophies
• James Montier’s 7 immutable laws of investing
• The best of Jesse Livermore
• IBD’s 10 rules for success

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