The Trillion Dollar Man. Lessons from Vanguard’s John Bogle.
A name mentioned among Titans of investing is Jack Bogle. You might have heard of his firm Vanguard. Vanguard takes after Admiral Horatio Nelson’s ship, the ship was called HMS Vanguard. Jack Bogle lived between the years 1929 to 2019. He evidently was instrumental in growing wealth for his clients. Most of his clients and shareholders applaud him for putting more money into their pockets mostly because of low cost investing. John Bogle’s investment strategy has for decades been successful to the extent that it attracted a huge following of investors whom to date call themselves Bogleheads. Below are lessons from John Bogle.
When you look into Jack Bogle’s life, it will not skip your attention that he went through quite a number of ups and downs. Among his lows was a time in 1974, he was fired by the Wellington board. It was a heart breaking moment for Jack Bogle. He had made a mistake that cost Wellington Management $1 Billion. John Bogle also known as Jack, pulled himself together and would later on invent the index fund, this has earned him the title “father of index investing”.
Think long term; the essence of Time and Compounding
John Bogle clearly knew where he wanted to be despite his lows. He might have made mistakes but he emerged a winner in the end. He categorially asks investors not to watch their investments, portfolio or markets often, instead they should focus on long term performance of their investments. It is true that the markets always go up over time. As such, it is important to not worry of periodic and short term market fluctuations.
Minimize Investment costs
Investing greatly benefits from the eight wonder of the world that is compounding. As gains compound, fees and costs do compound as well. It is therefore important for an investor to ensure that the costs that include fees to an investment are minimized. By minimizing investment costs, Jack Bogle through Vanguard has been able to save his investors hundreds of billions of dollars.
Put your Client’s Interests First
“The principle role of a producer is to satisfy the consumer,” Jack Bogle reiterates. This cannot be further from the truth. Clients need to be well taken care of lest they will soon leave for the next better offer within their reach. Arguably, this is why Vanguard has been able to grow and have over a Trillion of dollars of Assets under Management.
When clients are effectively served and their interests considered, they will often stick with you and bring more clients with them. The Bogleheads community is an example of what putting the clients’ interests first can do.
Indexing is Less Risky Compared to Conventional Investment Funds
Index funds bring together different stocks and weigh them into an average unit. The average unit tracks prices of the stocks therein. When one stock is underperforming, a performing one covers for the difference, which makes it less risky to invest in. John Bogle holds that index fund investing carries 20% less risk than the conventional investment fund. An example of an index fund is the S&P 500 that tracks the top 500 US companies.
Look for Tax efficiency
Index funds allow for reasonable tax efficiency and help investors and shareholders minimize tax and tax related costs. Notably, the long term approach that index funds tend to take encourages investors to hold their investors for long periods that when they are selling or liquidating their ownership, tax costs are effectively minimized.
Frequent or short term liquidation of investments attracts more and high taxes and tax related costs which is an undoing to the great financial tool for wealth creation that is index fund investing.
Spend more Time on Investing and Less on Marketing
Lastly, John Bogle puts its clear that it is important to focus on investing than marketing. If an underperforming product is marketed, it will not take long enough before it is phased out. Negative publicity spreads fast like wildfire and is one of the sure ways to spoil a brand. To avert such a danger, brands in the investment space are advised to first focus on working towards delivering value for their clients and shareholders. The more practical and return positive an investment strategy is, the more business will come the brand’s way. Summarily, this means a product has to be good before fronting it to the market. Product quality precedes marketing.
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