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hey guys welcome back so i'm really
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excited to share with you some
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excellent investing wisdom from the
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legend that is
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john c bogle known to his friends as
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jack jack bogle is the founder of
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vanguard and the man
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responsible for the creation of the very
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first index fund
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a product that has completely changed
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the investing world
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when jack bogle launched vanguard they
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had only
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1.5 billion dollars of assets under
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management
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now what many people don't realize is
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that vanguard wasn't initially a success
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for nearly 20 years it struggled to get
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customers and traction
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but jack bogle powered on believing in
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his mission
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and the power of indexing and did it
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work
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well for the last 20 years vanguard has
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exploded to now 6.7
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trillion dollars of assets under
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management so
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in this video i'm happy to share with
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you jack bogle's 10
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principles for investing success and
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it's funny because i've seen these
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principles about five
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times now and i still learn something
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new every time i watch it
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as always if you do find anything useful
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in the video be sure to
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drop a like that would be much
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appreciated okay sit back and relax guys
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here is jack himself to talk you through
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his 10 principles for investing success
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enjoy okay that's the probably that's
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number one of the rules and that's the
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most important of all
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and that is we talked a little bit about
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this earlier but that means that
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don't look back at past performance
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because all mutual funds one way or the
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other
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if they do very well in one period they
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will do badly in the next period
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if they do badly in the first period
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they'll do well in the second period
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it's so clear in the industry data and
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the only thing you can say to balance
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that a little bit off
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is high cost funds don't do quite as
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well in the good periods and do a little
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worse than the bad periods
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so cost remains a factor but reversion
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of the mean means
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don't think the past is prologue it
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rarely is and sometimes it's ant high
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prologue
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think of the value of compounding get
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yourself out a little compound interest
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table and see that
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at seven percent money doubles every 10
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years and then it doubles again and then
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it doubles again and then it doubles
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again it doubles again and doubles it
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and by the time
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you're at retirement age if you start
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investing when you're 50 it's multiplied
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you'll have to tell me but let me say 35
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or 40 times over
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unbelievable maybe even more than that
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it means don't make mistakes at the
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start
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pick a good fund and hold it through
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thick and thin
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and i would argue very strongly if
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you're looking at an actively managed
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fund
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and you should be very careful to buy
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the low-cost ones even if it's actively
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managed
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that don't get despondent when it does
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badly because it comes and goes
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so hold tight by by right hole tight
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means don't let yourself be diverted by
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changes in the manager's performance
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unless it's grossly excessive
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and by changes in the market you know we
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had all these years of
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12 17 annual returns in the eighties and
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nineties and people were surprised i
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can't imagine why
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but we had essentially zero return on
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common stocks in the first decade of the
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twenty reversing to the mean again
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reversion of the mean absolutely
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i still think bill gross who does does
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the new normal kind of idea is a little
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bit below me
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but i think common stocks should earn a
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nominal return
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of around seven percent nominal meaning
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before inflation
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and i don't make that up i think the
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dividend the dividend yield is a very
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very important thing in this
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and that's two percent today so
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corporate earnings should grow at about
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five percent in nominal terms
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i think that's about right because
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corporate earnings
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grow at the same rate of as the economy
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even over short periods the annual
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correlations are
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remarkably high and so you can look with
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reasonable expectations
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for seven percent return don't look for
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11 don't look for 15
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don't look for nothing don't await the
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coming of the next bear market those are
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all guesses
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and you know some some of those guesses
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will be good some not so good
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but uh when so there's the seven percent
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that will double your money every ten
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years
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and if that happens it's the high odds
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it should be
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uh good sailing but below the long term
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norm of nine percent because of that
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lower dividend
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now one thing that trips us up when we
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get into these returns
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is that there's one other i gave you the
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formula for the investment return or
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fundamental return on
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on stocks which is dividend yield plus
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earning corporate earnings growth
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because the stock market doesn't
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contribute anything to this it's
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corporations that do that they got a lot
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of capital
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they invest it well they re they pay out
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dividends reinvest the rest it's not a
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complicated system
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so you go that far with
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investment return there's always this
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nasty little element of speculative
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return
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and then it's a multiple of earnings and
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the amount people will pay for a dollar
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of earnings
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goes from 10 to 20 say that's a double
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and over 10 years that's an addition of
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seven percent return
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so if it doubles in this coming period
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that would add take that seven percent
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up to fourteen percent
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is that likely to happen no it is not
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it's almost inconceivable
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because the price of the market it seems
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to me is roughly fairly valued today
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at iran i use people use all kinds of
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numbers i use sort of a central number
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of 16 times earnings
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and you know if it goes to 18 times
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earnings or goes down to 14 times
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earnings that's not gonna
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over ten years that's not going to
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affect that seven percent very much if
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it goes to 25 times earnings
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i can't imagine that would take the
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earnings way up and if it goes to
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four times earnings which is really
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pretty inconceivable that would take it
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down
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so i look for speculative return to
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add nothing or subtract anything from
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that investment return
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and the interesting thing about that is
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we think so much about speculative
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return
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day to day year to year decade to decade
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even but in the long term say 100 years
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speculative return is going to be
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zero buying a good manager is like
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looking for a needle in a haystack
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and everybody knows what that's about
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and good old don quixote had it about
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right
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and so it just makes common sense on the
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whole market
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and not just a few stocks that's a you
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don't need to take the risk of
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individual stocks
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take the market risk which is quite high
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enough you don't take both
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go for low-cost funds and especially
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index funds think about that for a
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minute
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i don't like the risk in the stock
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market so put your money in a
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savings account a certificate of deposit
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there's no risk there
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wait a minute the return there
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is probably going to be about one and a
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half percent and we're going to have two
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and a half percent inflation
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so the real return is essentially this
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has been true all over history
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that the return on a savings account
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the nominal not the donald trump the
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real return
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the nominal return of say one and a half
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percent at the moment very very low
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uh turns into a real return of minus one
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percent
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so is there any risk in putting money in
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a savings account you better believe it
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and everybody needs a little bit of a
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anchor to windward but
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keep that low and of course in these
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days with the money market i would
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strongly recommend
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short intermediate term corporate bonds
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to replace at least part of that
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because the yields there at least exist
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saying something these days a great
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example is
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people started to worry about inflation
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about 20 years ago
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and so we had funds inflation beaters
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fund and all that kind of thing
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that was the last war inflation then
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pretty much stopped for a long time
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and uh the inflation that we had from
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let me say post world war ii to
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say around 1980 and we always have some
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inflation but it got to be six seven
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eight percent in some years
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and so people want to protect themselves
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about that they forget that if you look
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at the wholesale price in london
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one good measure of inflation uh the
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prices before world war one
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were exactly what they'd been at the
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time of the great fire in london in 1666
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that's a long time to have no inflation
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but
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you never know what's going to happen on
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that front so another i mean part of
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that caution
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is your job is to get the biggest gross
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return because inflation is going to
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take whatever it takes out of that
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return
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and that's a big return it will move it
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down a little
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but it's a little return it will
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eliminate it so you want to think of it
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never
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you never want to forget that that's one
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of my favorites
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i didn't make it up there's a greek poet
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back probably in
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the third century bc named arcolakis and
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they found
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a little fragment of arcolox's writing
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and it said
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the fox knows many things but the
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hedgehog knows
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one great thing and in our business
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the foxes are all those managers smarter
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they got all those computers all those
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brilliant
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harvard business school graduates armies
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of them and they know everything
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and they don't far more than i could
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dream of knowing i know one great thing
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and that if you own the market which
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they do collectively naturally
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and if you own the market you are
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guaranteed in a low cost index fund
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you are guaranteed to earn your share
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fair share
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of whatever the stock market is kind
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enough to give us and let's be very
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clear on this
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whatever return the a bad market is
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mean-spirited enough to take away from
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us
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so it's the hedgehog who wins
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and the poor fox with all his wiles and
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his marketing department it figures out
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what everybody wants
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all those crazy things that's going on
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our business he's yesterday
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and he's going the best thing to do
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is behavioral let me start with this
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premise
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most investors many investors probably
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the majority
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lose because of their own behavior and
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not because of how stocks and bonds do
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they are trailers they buy something
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that's done well and think it's going to
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do well in the future and it doesn't
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they a whole lot of bad behavioral
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patterns if they find a hot manager they
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jump
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on the bandwagon and that doesn't work
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they just can't
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do it and the markets are really just
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think about this for a minute
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really counter intuitive because when do
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you feel your most optimistic and most
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happy and enthusiastic about buying
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stocks at the market peak
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when are you scared to death about
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stocks and really want to get out
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at the market bottom so you get into
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topping out in the bottom do you think
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you're going to do well doing that
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so figure out a sound program i would
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argue one with an appropriate
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set part of of uh bond bonds
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and bond funds really and stock funds
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index funds i would say in both cases
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and let that allocation
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favor bonds a little bit more as you get
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older and finally quite heavily when you
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get to retirement
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and uh almost all in stocks before you
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start down that road
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and that's a good formula for work it
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doesn't have to be a formula but a good
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rule of thumb heuristic as the academics
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would say
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and so that's what staying the course
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means set the right course
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and then don't let all these superficial
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emotional
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momentary things get in your way
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another way of putting is don't do
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something just stand there
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so there you are guys that was the
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legend jack bogle's 10 principles for
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investing success
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such an incredible man and i hope you
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enjoyed them
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just as much as me in fact just one
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favor to ask if you did find anything
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useful in the video
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or just a big fan of jack bogle be sure
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to drop a like
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it only takes two seconds and that would
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be really much appreciated
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if you haven't yet subscribed to the
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channel i invite you to
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click below and join us i do have some
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great videos coming up that you don't
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want to miss
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okay cheers guys thanks for watching and
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i'll see you in the next video
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bye for now
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[Music]
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you
