The "3 WORD RULE” of the markets - lessons from John Bogle
John C. Bogle - Siant Jack is the industry nickname - is a founder
and retired CEO of the Vanguard Group. One of the most successful
contemporary investor. He emphasizes only investor, he is not a
speculator, as he says investing is long term wealth creation on the contrary the speculation that is a loser’s game.
And what is his „3
WORD RULE”?
When he was at Princeton he had started to work for a
brokerage firm. There was one of the old runner said to him:
- „I am gonna tell you everything what you need to know if you are going into the investment business.
- What’s that?
- And he said, three words. NOBODY KNOWS NOTHING.”
All of us meet each day a trader or guru who thinks that he is smart enough giving
advices. And he does that with 100% confidence. The
gold by next week go up to 1600
, the oil goes down within one week to 70 bucks.
They should have some kind of
crystall
ball. But believe me, nobody has any holy grail. In simple way we are
not able - none of us - predict the future. If anybody tells
you EURUSD will move to 1,3400 for sure. At least what you have to do is being
sceptical, but the the best way ignore fully and closed out those sort of
advices.
We don’t know what the future holds, we only guess. We look at the
past which sometimes misleads us, sometimes doesn’t. That is part of our
job. Therefore, there is no 100% hit-rate
systems, we have to lose money many times. This is our payment to the
devil of market. The market is very hard to deal with. We all have
opinions out there, and we say to our self I am smarter than anybody else and that just not gonna happen. It is impossible. We are not smart enough. If anybody is overconfident and really believes he is smarter than anybody, I can guarantee he will lose all his capital.
John Bogle’s system is a passive approach of the market. This is
perfect buy&hold strategy. As he says „BUY RIGHT AND HOLD TIGHT”.
His system is simple, but overwhelmingly profitable. In 1975 he founded
the Vanguard Mutual Fund and after one year in 1976 he introduced the
first index fund for individual investors, which is called the Vanguard
500. Here is the historical performance since 1987.
Since 1987 the YTD performance is around 20% in each year, and total performance is over 416%. Now the fund has in assets more than 2 trillion dollar.
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