8 Investing Tips from John C. Bogle to Help You Build Generational Wealth

The late John Bogle was a revolutionary in the world of investing, who founded Vanguard, one of the largest, and most well known financial services companies on the globe.

He is also widely regarded as the father of index funds, having advocated for them for many decades, with Vanguards popular ETFs managing trillions of dollars of wealth, including some of mine.

As someone who had an entire lifetime of experience in investing, here are 8 priceless investment lessons from John C. Bogle.

Losses Are Inevitable

If you have trouble imagining a 20% loss in the stock market, you shouldn't be in stocks, says Bogle.

Recent stock market crashes have made this abundantly clear. It's important, if you're going to invest in stocks, to understand that the market drops by about 20% or more every few years, and that after each drop, it has always recovered and gone on to new highs.

That's why you only want to invest with money you won't need for at least 5-10 years.

Don’t Try to Beat The Market

Owning the stock market over the long term is a winner's game, but attempting to beat the market is a loser's game.

As of 2019, the S&P 500 index of 500 of America's biggest companies outperformed 90% of large-cap stock mutual funds over the previous 15 years.

In other words, only about 10% of mutual funds run by professionals are able to deliver above-average results. This is largely due to the fees that they charge.

If there’s a lesson here, it’s that time in the market will almost always beat timing the market.

Investing is Not About Numbers

The true investor will do better if he forgets about the stock market and pays attention to his dividend returns and to the operating results of his companies.

In other words, be a long-term adherent of fundamental investing, where you focus on the companies in which you're a part-owner through your shares, keeping up with their progress and assessing factors such as their…

• Market share

• Profit margins

• Track record of growth

• Prospects for further growth

• Sustainable competitive advantages

• Debt and cash levels

…and so on.

Investing in the stock market is not a game of numbers. It is a game of business. Business means sales. Sales means profit. Profit, means a greater stock price.

Historical Data is Irrelevant

Buying funds based on their past performance is not a smart move. This is a common mistake that investors make, and stock investors make it, too.

If you see a fund that soared more than, say, 50% last year, you might jump in, wanting to collect a 50% return yourself.

Well, that's not how it works.

Any fund or stock can have an amazing year, perhaps partly due to investor euphoria and optimism or due to a truly impressive performance.

But it doesn't happen every year. And when stocks and funds get ahead of themselves, they're very capable of falling back to more reasonable levels.

Focus on long-term results, and the current value of an investment in relation to what it’s truly worth.

Learn to Control Emotions

The two greatest enemies of the investor are expenses and emotions.

The cost of expenses is significant, especially when compound interest is factored in over years of investing.

Emotion, though, is another challenge for investors to overcome.

Recent market drops tend to lead many people to panic and sell their stocks, which leads to further losses. Market drops are actually great buying opportunities for long-term investors, but you have to learn to control the emotional side of investing.

Remember, be greedy when others are fearful, and fearful when others are greedy.

Don’t Overcomplicate Investing

When there are multiple solutions to a problem, choose the simplest one.

Simplicity is often best in investing. Many people think about investing and assume they need to learn all about commodities and futures and options and that they have to become experts at reading financial statements in order to study many companies.

Instead, think back to Bogle's simple index funds.

You can just park money in one or more index funds regularly for many years and do very well - without becoming a stock market expert.

You Don’t Need The Best Investments to Succeed

Don't look for the needle in the haystack. Just buy the haystack!

When you invest in a broad-market index fund, such as one that tracks the whole U.S. stock market, like Vanguards $VTI, it lets you skip looking for the most promising stocks among thousands - because you just buy into all the thousands.

As mentioned earlier, these broad funds rarely get beaten by professionals. There’s no need to waste your time trying to get more out of your money, when you can invest into these funds, sit back and relax.

Long Term Mindset is Key

The winning formula for success in investing is owning the entire stock market through an index fund, and then doing nothing. Just stay the course.

You know exactly what you’re getting with an index fund, and there’s very little need for extensive research.

Finally, if you become an index investor, you just have to stick to the plan. Keep investing in it for many years, without panicking and selling.

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