DIY Investor Magazine
| Oct 2017
12
DIY INVESTING TIPS FOR MILLENNIALS FROM
ONE OF THE WORLD’S GREATEST INVESTORS
John ‘Jack’ Bogle grew up in a family deeply affected
by the Great Depression; as an economics student at
Princeton University, Bogle focused on mutual funds,
producing a senior thesis entitled ‘The Economic
Role of the Investment Company’ which contributed
to his lifelong investment philosophy and eventual
development of the index mutual fund.
In 1974, Bogle founded the Vanguard Group mutual
fund company which in 1976 launched Vanguard 500, a
low-cost, high-return option for less wealthy investors.
Bogle served as CEO and chairman of Vanguard until
1999 when he stepped down following a transplant
after a lifelong battle with a congenital heart condition;
in the same year, Fortune named him as one of the four
‘investment giants’ of the 20th century.
Vanguard now has $4 trillion in assets under
management and as president of Vanguard’s Bogle
Financial Markets Research Center, Jack maintained an
active post-investment career as an author and speaker
on a variety of financial matters.
His biographer Robert Slater describes Bogle’s life
as ‘evolutionary, iconoclastic and uncompromisingly
committed to his founding principles of putting the
interests of the investor first and constructively criticizing
the fund industry for practices that run counter to low-
cost, client-oriented mutual fund investing’.
As the creator of the broad-based index mutual fund,
Bogle focused much of his attention on low-cost and
low-turnover passively managed funds; in helping
individual investors grow their assets, he recommends:
•
A simple investment strategy
(avoid rebalancing asset allocation too frequently)
•
Keeping costs and expenses associated with
investments to a minimum
•
Taking a long term view
•
Rational analysis and eliminating emotions from in
the decision-making process
•
Index investing as an appropriate strategy for
individual investors
As part of this work Bogle, now aged 88 recently
delivered some nuggets of wisdom for young people,
acknowledging the challenges they face with the
economy and the job market; according to a study by
the Pew Research Centre, millennials are the only one
of the four current generations that doesn’t identify work
ethic as a key part of their identity.
Many want to shun corporate life and be in control of
their own destiny by starting their own business and
seeking financial independence.
To them Bogle offers the following advice to those going
it alone and possibly considering DIY investing:
Have a stomach for risk
– ‘Being an entrepreneur is
not for the faint of heart. It is a high-risk, high-reward
proposition. While we would typically encourage young
people to start saving for the future as early as possible,
it’s unlikely that a budding entrepreneur will be able to
do so.
The entrepreneur will need every bit of capital available
for the business, which will likely crowd out personal
savings. This may not be prudent in the traditional
sense, but it is necessary. The entrepreneur’s business
can be thought of as a highly risky, concentrated stock
position. If it doesn’t work out, you can be wiped out.
But if it does work, the rewards can be ‘beyond the
dreams of avarice.’
Be sure to work longer, harder and smarter
– ‘Work
hard as hell. It doesn’t hurt. That was the secret for (US
statesman and Founding Father) Alexander Hamilton
and that was the secret for me.’ By his own admission
Bogle never mastered the idea of a work/life balance.
Find a company that is the right company
, even if it is
the wrong job for you – ‘Once you get in the door, it will
CREATE A FUND THAT IS 75% INVESTED IN STOCKS
(‘GET THE STOCK MARKET’S RETURN’)
