10 Rules of Investing (from a trillionaire founder)
Nov 16, 2024Read time - 3 minutes / Disclaimer
John Bogle founded the trillion dollar company Vanguard.
50 million investors have a Vanguard account.
Bogle's 10 rules of investing can:
- Save you time.
- Save you money.
- Help you build wealth faster.
Unfortunately, fees are a big part of investing.
They Cost You
The average person might pay annual investment fees of:
- $1,000+
- $5,000+
- $10,000+
Bogle helped change that when starting Vanguard.
He also helped simplify investing.
Bloomberg via Getty Images
Vanguard was one of my first investment accounts.
As an eager new investor, you want to minimize your fees and maximize your earnings.
Vanguard helped do both by inventing the first index fund.
Here's Bogle's 10 rules of investing:
Rule 1:
Remember "reversion to the mean".
According to Bogle, hot stocks today won't be hot stocks tomorrow.
Stock prices often become out-of-sync with a company's intrinsic value but eventually adjust.
Don't chase the high fliers.
Rule 2:
Time is your friend, impulse is your enemy.
Use time and compound interest to grow your investments.
Avoid "hot tips" and impulsiveness.
They often lead to buying at the wrong time (when a stock is soaring) and selling at the wrong time (when a stock is crashing).
Rule 3:
Buy right and hold tight.
Bogle states once you've identified your investing strategy —
Stick with it.
Don't let greed or fear drive your investment decisions.
Rule 4:
Have realistic expectations.
Building wealth takes time.
It's a marathon, not a sprint.
Focus on steady growth over the long term.
Rule 5:
Forget the needle, buy the haystack.
Instead of trying to find the "hot stock".
Bogle insists it's better to just "be" the market.
Meaning— buy the whole market (like an S&P500 index fund) instead of picking individual stocks.
Rule 6:
Minimize the "croupier's take".
Keep your fees low by investing in low-fee funds.
Overpaying can cost you thousands in the long run.
Pay attention to your fees.
Rule 7:
There's no escaping risk.
If you don't save, you can't build wealth.
If you don't invest, your savings won't beat inflation.
Risk is part of wealth building.
Rule 8:
Beware of fighting the last war.
What worked in the past isn't guaranteed to work in the future.
History may rhyme (as Mark Twain says) but it rarely repeats exactly.
Understand this and be open to change.
Rule 9:
The hedgehog beats the fox.
A fox is a sly, intelligent creature with many ideas.
Bogle views financial institutions as the fox.
A hedgehog is simple and effective when threatened. It rolls up into a ball and lives another day.
Bogle views index funds as the hedgehog.
Stick with simple.
Rule 10:
Stay the course.
The secrets to investing according to Bogle don't include stock picking and forecasting.
They include:
- Making a plan.
- Sticking with it.
- Keeping risks low.
- Keeping costs low.
In other words, just relax, and let stocks do their thing.
Conclusion
Bogle's simple approach is a low stress way to invest.
It's my preferred method (my hairline can't handle more stress).
VOO and chill is a popular saying among investors.
If picking individual stocks gives you the cold sweats — consider an index fund.
VOO is Vanguard's low-cost S&P500 index fund.
Buying VOO means you own 500 different companies including:
- Apple
- Microsoft
- NVIDIA
- Amazon
- Meta
You can open a free Vanguard account or read more about VOO here:
Keep buildingđź’°
See you next week.
