Anyone who has reaped the benefits of an index mutual fund owes a debt of gratitude to John Bogle.
Bogle, founder of the Vanguard Group, died Wednesday at age 89. Even if you’ve never heard his name, if you have a 401(k) or an IRA, you may have profited from his life’s work. His pioneering efforts to develop and popularize index funds — investment bundles that offer investors an easy way to diversify their holdings, slash costs and minimize risks — changed individual investing forever.
Bogle also had a gift for distilling investing intelligence into memorable aphorisms. Below, six writers on the NerdWallet investing and taxes team share some of their favorite Bogle-isms — and why these ideas matter so much to modern investing.
(Note: The writers’ conversation has been lightly edited.)
1. “Fund performance comes and goes. Costs go on forever.”
Dayana Yochim: Boy, do they! While compound interest propels long-term investment returns, compounding costs eat away at those gains. That’s why one of the best moves an investor can make is to crack down on investment fees.
Arielle O’Shea: You can’t avoid fees completely, but you can seriously reduce them — thanks in large part to Bogle himself. But the first step is knowing what you’re paying. Your 401(k) account or IRA isn’t going to send you a bill each month. The onus is on you to look at your investments, find out what they’re costing you, and see if a suitable alternative — likely an index fund — is available.
Andrea Coombes: This quote is so Bogle, through and through. The man who essentially brought us the lowest-cost investments on the planet knew whereof he spoke. Arielle’s right — we each of us need to check on our investment fees. It might sound hard, but it’s not actually that hard. With mutual funds, just look for the expense ratio. Stick to mutual funds that charge about 0.5% or less.
2. “Don’t do something. Just stand there.”
Noting that the more active clients were, the more fees investment managers would collect, Bogle counseled: “The way to wealth for those in the business is to persuade their clients, ‘Don’t just stand there, do something.’ But the way to wealth for their clients is to follow the opposite maxim: ‘Don’t do something. Just stand there.’”
Kevin Voigt: Much of Bogle’s investing philosophy speaks to wrangling emotions out of making investing decisions, especially when markets hit turbulence. Investors — watching breathless coverage on CNBC as their inboxes fill with “don’t miss this!” marketing touts — naturally get itchy trigger fingers to “do something!” to their portfolio. This quote neatly encapsulates how doing the right thing to grow your wealth so often feels counterintuitive.
O’Shea: I think the antidote to that “do something!” feeling is to control what you can control: You can’t control the stock market, but you can control — at least in part — how much you’re saving and spending. So if you’re itching to do something, revisit your budget and see if you can find some extra money to boost your savings a bit.
Yochim: And stop hitting the refresh button every five minutes to see how your investments are doing.
Coombes: I always hesitate when I suggest to people that they don’t check their 401(k) statement during times of market turbulence. Because I want people to keep an eye on their finances, for sure. But it’s actually really good advice. Once you’ve set up your low-cost, diversified investment account for your long-term goals, you really don’t need to do much more, other than revisit it about once a year.
O’Shea: I also think it’s important to know what kind of reaction you’re likely to have. If you’re the type to check and panic, don’t check. If you like to know where you stand but you’re confident it won’t cloud your judgment, that might be OK. But it’s tricky, because we know people aren’t always honest with themselves.
3. “The stock market is a giant distraction to the business of investing.”
Anna-Louise Jackson: “The market’s up by the most in some-arbitrary-period!” “It’s plummeting to levels not seen in mere weeks!” There’s an entire business around tracking the moves in the stock market, no matter how minuscule or massive. But to Bogle’s point, what’s happening in the market daily, or even weekly, will have little bearing on your long-term investment returns.
O’Shea: Exactly. The average investor would actually do well to not watch the market.
Coombes: I want to go on record right here thanking Mr. Bogle for giving the thumbs-up for us to set-and-forget our long-term investments. I just really wish his message would drown out all the daily market madness. More people need to hear his message.
4. “The greatest enemy of a good plan is the dream of a perfect plan.”
O’Shea: Might there be an investment out there that will beat the ones in your portfolio? Yep. But you could lose a lot of time and money searching for it. I love this Bogle quote, because it shows how his wisdom often applies well beyond investing.
Tina Orem: As in life. This is FOMO (fear of missing out) for investing.
Yochim: And the beauty of it as it relates to investing is that the “good enough” investment of buying an index fund and equalling the market’s return is actually better than 80% or more of the actively managed funds that are seeking that edge, or perfection.
O’Shea: It’s FOMO, and it’s snubbing the reliable for the flashy. If you’re always searching for something better, you’ll never find it. But as Dayana noted, often the “good enough” is also the better.
Coombes: I think, too, this really speaks to people being afraid to start investing because they think they don’t know how to do it. Thanks to Bogle creating index mutual funds, absolutely anyone can invest. And as he makes clear, you don’t have to be “great” at investing (whatever that even means). You just have to start.
5. “Owning the stock market over the long term is a winner’s game, but attempting to beat the market is a loser’s game.”
Voigt: Bogle’s life work — creation of the index fund and igniting the passive investing revolution — is backed by the stats: Actively managed funds generated annual returns of less than 4% in the last 30 years, while passive investing generates about 10% returns per year. “Being” the market is much better than “beating” the market.
Jackson: People like to brag about the “hot” stock they bought that earned triple-digit returns. Funny how you don’t hear about the losers. Bogle’s message was that diversification works — and if you accept that by investing in diversified index funds, you’ll prosper. He drove this home in an interview with Jason Zweig of The Wall Street Journal, saying, “Diversification is not only the first important thing investors should think about, but the second and the third and probably the fourth and fifth, too.”
Coombes: Any investor who recognizes the truth in this Bogle quote will feel the tension slip away. Once you realize that all you need to focus on is what you can actually control — maintaining a diversified investment portfolio and sticking with the stock market for the long term — you’ll realize that investing can actually be a remarkably stress-free way to grow your wealth. Thank you, Mr. Bogle.