When Jack Speaks


Ya, you should listen. If you don’t know who John Clifton "JackBogle is, do yourself a favour and find out a bit about him. If you want to talk money, you should know Jack.

Jack recently wrote an essay in the Financial Analysts Journal where he condenses what he’s learned from 65 years in the investing industry. This is link to the full article if you are really serious about investing. If you just want the meat, then read on.

These are Jack’s seven key points for investing that you should take to heart, and if not, at least to your investment strategy.

Invest you must

“The biggest risk facing investors is not short-term volatility but, rather, the risk of not earning a sufficient return on their capital as it accumulates.”

Time is your friend

 “Investing is a virtuous habit best started as early as possible. Enjoy the magic of compounding returns. Even modest investments made in one’s early 20s are likely to grow to staggering amounts over the course of an investment lifetime.”

Impulse is your enemy

“Eliminate emotion from your investment program. Have rational expectations for future returns, and avoid changing those expectations in response to the ephemeral noise coming from Wall Street. Avoid acting on what may appear to be unique insights that are in fact shared by millions of others.”

Basic arithmetic works

“Net return is simply the gross return of your investment portfolio less the costs you incur. Keep your investment expenses low, for the tyranny of compounding costs can devastate the miracle of compounding returns.”

Stick to simplicity

 “Basic investing is simple — a sensible allocation among stocks, bonds, and cash reserves; a diversified selection of middle-of-the-road, high-grade securities; a careful balancing of risk, return, and (once again) cost.”

Never forget reversion to the mean

 “Strong performance by a mutual fund is highly likely to revert to the stock market norm—and often below it. Remember the Biblical injunction, ‘So the last shall be first, and the first last.’”

Stay the course

 “Regardless of what happens in the markets, stick to your investment program. Changing your strategy at the wrong time can be the single most devastating mistake you can make as an investor. ‘Stay the course’ is the most important piece of advice I can give you.”

Jack’s last comment is very important and he talks about “your strategy”. Both investors and their advisors should put the effort into ensuring their strategy is sound upfront. Sticking to a bad strategy could be as bad as being random in decisions, which begets less predictable outcomes. Lack of predictability is our enemy when it comes to investing, and clearly if you have read Jack’s comments, the enemy is within us. It is how we choose to invest that dictates our come far more than the vagaries of the markets.