John Bogle’s Six Lessons for Investors

January 8, 2009

John Bogle had an excellent opinion piece in today’s Wall Street Journal titled Six Lessons for Investors. His lessons (along with my commentary):

1. Beware of market forecasts, even by experts. – His point being that forecasts are nearly always optimistic and although sometimes they may be right, they are more often wrong.

2. Never underrate the importance of asset allocation.

3. Mutual funds with superior performance records often falter. – The S&P 500 was down 37% in 2008 while Bill Miller’s Value Trust was down 55%—and that was the second year in a row his fund had underperformed the S&P 500 after fifteen straight years of beating the average.

4. Owning the market remains the strategy of choice. – If you own the market, you don’t have to worry as much about problems with one particular company. Yes, if the economy tanks, you’re still going to lose money.

5. Look before you leap into alternative asset classes. – It hurts to be a bandwagon investor!

6. Beware of financial innovation. – Lumping together crappy mortgages and selling them off as “safe” securities was a financial innovation—a really stupid one!

Read Mr. Bogle’s piece here.

Of course the question is: will we learn from these lessons?

Related: Jonathan Clements on the Credit Crisis and Current Economy

3 responses to John Bogle’s Six Lessons for Investors

  1. Thanks for sharing these tips! I especially like #1, #3 and #6. So many try to use market timing, past performance and “innovation” to make an amazing windfall.

  2. #6 rings so true for these days. Everyone tries to make the latest and greatest but really is just a turd with a bow.

  3. I definitely agree with Thomas in #6 and for Miranda in #1. These are the two things which I like on the lessons John Bogle’s wants us to learn. We should not always rely on forecasts. It serves as a guide only to us. And when there is a new innovation don’t indulge yourself right away. Examine first..