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John Bogle’s 10 Rules of Investing

• 08/28/2012 1:58 AM

• Cullen Roche

• 8 comments

I missed this piece on CBS Money Watch last week and wanted to pass it along in case you did as well. It lists

John Bogle’s 10 rules of investing . Bogle is truly a living legend so his insights are a great addition to some

other “rules lists” that I’ve compiled below:

“1. Remember reversion to the mean. What’s hot today isn’t likely to be hot tomorrow. The stock

market reverts to fundamental returns over the long run. Don’t follow the herd.

2. Time is your friend, impulse is your

enemy. Take advantage of compound interest and

don’t be captivated by the siren song of the market.

That only seduces you into buying after stocks have

soared and selling after they plunge.

3. Buy right and hold tight. Once you set your

asset allocation, stick to it no matter how greedy or

scared you become.

4. Have realistic expectations. You are unlikely to

get rich quickly. Bogle thinks a 7.5 percent annual

return for stocks and a 3.5 percent annual return for

bonds is reasonable in the long-run.

5. Forget the needle, buy the haystack. Buy the whole market and you can eliminate stock risk,

style risk, and manager risk. Your odds of finding the next Apple (AAPL) are low.

6. Minimize the “croupier’s” take. Beating the stock market and the casino are both zero-sum

games, before costs. You get what you don’t pay for.

7. There’s no escaping risk. I’ve long searched for high returns without risk; despite the many

claims that such investments exist, however, I haven’t found it. And a money market may be the

ultimate risk because it will likely lag inflation.



Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial

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8. Beware of fighting the last war. What worked in the recent past is not likely to work going

forward. Investments that worked well in the first market plunge of the century failed miserably in

the second plunge.

9. Hedgehog beats the fox. Foxes represent the financial institutions that charge far too much for

their artful, complicated advice. The hedgehog, which when threatened simply curls up into an

impregnable spiny ball, represents the index fund with its “price-less” concept.

10. Stay the course. The secret to investing is there is no secret. When you own the entire stock

market through a broad stock index fund with an appropriate allocation to an all bond-market index

fund, you have the optimal investment strategy. Discipline is best summed up by staying the

course.”

And a few more lists here:

• Timeless investing lessons

• 6 Investing Rules by Michael Steinhardt

• Bob Farrell’s 10 rules

• 7 Rules by Howard Marks

• Richard Bernstein’s 10 Guidelines

• 8 Investment Lessons from Bruce Berkowitz

• Guru Investing Philosophies

• James Montier’s 7 immutable laws of investing

• The best of Jesse Livermore

• IBD’s 10 rules for success

And never forgets Warren Buffett’s rules of investing. Rule #1 – Never lose money. Rule #2 – Never forget

rule #1.

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5. Johnny Evers says:

08/30/2012 at 11:41 AM

Would index investing work if everybody was an index investor?

…

One way to look at this is through the Burger King location strategy. While McDonalds puts a lot of time

and money into finding optimal locations, what Burger King does is follow McDonalds around a build

across the street.

What an index investor does is watch where others put their money and then does the same at lower costs.

Don’t get me wrong — index investing works, but you are piggybacking on the efforts of others.

…

It’s also worth nothing that what index investing does is narrow your range of outcomes. You are the

index. Now somebody else may beat you with a narrow group of stocks and somebody else may trail you.

6. Tom Brown says:

08/31/2012 at 6:36 PM

Here’s another investing idea based on variable annuity loopholes:

http://www.propublica.org/article/death-takes-a-policy-how-a-lawyer-exploited-the-fine-print

So basically the formula is:

1) Find someone on the brink of death that agrees to be an “annuitant” for a nominal fee.

2) Take 50% of your money and invest in (through the annuity) crazy aggressive funds (like those iShares

funds that go up 4x what the S&P does).

3) Take the other half and invest in crazy pessimistic funds (again, iShares that go up 4x the amount the

S&P goes *down*)

Sit back and relax… as long as your annuitant isn’t long for this world, you can’t lose!!

…uh, that is until the FBI indicts you… for exactly WHAT it’s still not clear. Seems like the guy obeyed

all the laws to me!

…of course the insurance companies realized their mistake now and have closed that particular loophole,

so we’ll have to find another one!

7. Andrea Malagoli says:

09/04/2012 at 1:29 PM

These principles are a bit dates. John Bogle became a legend because he promoted passive index investing

in the middle of the largest bull market in history. His ideas have been failing for a while, and in fact they

have been part of the reason why many people came into 2008 unprepared.

The idea that the long term takes care of things is a myth.

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How To



John Templeton’s Investment Rules

Here’s a good list of legendary investor John Templeton’s investment rules. Barry Ritholtz has more details on

each rule at his site (see here), but the summary is below. It’s a nice addition to our growing list of rules and

guidelines (see here). 1. Invest for maximum total real return 2. Invest — Don’t trade [...]

continue reading

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10 Rules of Investing

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