JOHN BOGLE - THE "3 WORDS RULE" OF THE MARKETS

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 WORDS 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 do not 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.

http://finance.yahoo.com/echarts?s=VFINX+Interactive#symbol=vfinx;range=my;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined

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.

The BFM Assets Team.