Vanguard founder John C. Bogle had many famous quotes relating to investing that still hold true in today’s context. In this article, we revisit some of them in the hopes that they can inspire and guide you no matter where you are in your investment journey.
“Don’t look for the needle in the haystack. Just buy the haystack!”
This quote is probably the most famous of all Bogle quotes. The haystack refers to a broadly diversified index fund and is the basis on which one of the largest index funds — the Vanguard 500 Index Fund1 — was created nearly 50 years ago in 1976.
Bogle’s belief was that rather than try to pick winning stocks, market returns could be captured through a low-cost index fund. This approach not only offers exposure to potential growth across multiple sectors, but also provides the diversification benefits inherent in index investing. Today, millions of investors around the world benefit from the broad diversification and low costs of index investing.
However, index funds won’t suit everyone. Whether they fit your circumstances depends on your goals, time horizon and risk tolerance.
"Where returns are concerned, time is your friend. But where costs are concerned, time is your enemy."
Albert Einstein is often credited with calling compound interest the eighth wonder of the world. Whether or not he actually said it, the sentiment rings true. But even small differences in fees and costs can erode returns over time, which is why Bogle was so focused on reducing them.
As investments generate returns, these returns can be reinvested and over the long term, that can lead to exponential growth over time. On the other hand, every dollar that goes towards investment costs is a dollar less in investment returns. And over time, these costs can add up and have a significant impact on your portfolio balance.
“If you have trouble imagining a 20% loss in the stock market, you shouldn't be in stocks.”
Market ups and downs are a reality for every investor. But while bear markets (defined as a 20% or more drop in share prices from their high) can be unsettling, history has shown us that staying invested during volatile periods can improve an investor’s chances of investment success over the long-term.
However, Bogle’s quote not only emphasises the importance of staying focused on your long-term investment goals but also highlights the value of understanding your own risk appetite.
It is natural to feel confident when markets are doing well and to feel concerned when they are not. But if short-term volatility is causing you extreme anxiety, perhaps consider if your asset allocation is aligned to your personal risk tolerance, and if it is sufficiently well diversified for you to weather difficult market environments.
“Speculation leads you the wrong way. It allows you to put your emotions first, whereas investment gets emotions out of the picture.”
Speculation and investing both mean putting your money into things you hope will grow, but the way you go about it is vastly different. Speculation is about chasing quick wins — trying to catch the next big jump by following market trends or timing. It can be risky and come with big losses, as well as occasional big wins. Investing, on the flip side, is about playing the long game: picking things based on real value, steady growth and patience. Knowing the difference will help you choose what fits your goals and risk appetite.
"Don't do something — just stand there."
In times of market volatility or severe market disruption, it can be tempting to “do something” instead of just watching the market indices go down and further down.
However, it is important to recognise that choosing not to act in response to a volatile period in the markets demonstrates intentional decision-making. Perhaps it was a conscious decision in consultation with your financial adviser, or willing yourself to stop checking your investment balance too often.
History shows that those who remain invested are often the ones who benefit the most in the long run.
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All investing is subject to risk, including the possible loss of principal. Be aware that fluctuations in the financial markets and other factors may cause declines in the value of your account. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income. Diversification does not ensure profit or protection against a loss.
1 The Vanguard 500 Index Fund is a US domiciled fund and is not offered in Australia. This reference is for historical context only and does not constitute an offer or recommendation. Australian investors should refer to locally available products and read the relevant Product Disclosure Statement (PDS) and Target Market Determination (TMD) before making any investment decision.