Jack Bogle Offered 12 Words That Transformed Investing. Today, They're More Crucial Than Ever.
Key Points
Jack Bogle believed in buying “all the stocks” at once, with low-cost index funds.
Bogle's buy-and-hold investing in a broadly diversified stock portfolio remains smart advice for most investors.
The Vanguard S&P 500 ETF has delivered 15% annualized returns for the past 16 years.
- 10 stocks we like better than Vanguard S&P 500 ETF ›
Jack Bogle founded Vanguard and was a legendary figure in modern American investing. He invented the index fund, which ushered in a new era of low-cost investing. Instead of having to pick stocks or pay high fees to stockbrokers and money managers, index funds made it easier for millions of everyday people to invest in the stock market with low fees.
Bogle's low-cost index fund revolution has saved more than $1 trillion for investors. But along with low fees, Bogle promoted a style of simple, diversified, buy-and-hold investing that is smart advice for many people today.
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If you had to boil down Bogle's investing approach to a few simple words, they would be these: "Nothing is simpler than owning the stock market and holding it forever."
Let's look at what Bogle's words mean for investors -- and why they might be more important than ever.
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Jack Bogle's investing advice: Own the stock market...
Jack Bogle invented index funds as a way for average investors to buy the entire stock market, such as the S&P 500 index (SNPINDEX: ^GSPC), all at once -- all in one ticker, in one trade. Bogle believed that most people would be better off owning "all" the stocks instead of trying to pick winners. And he wanted to cut down on the fees that traditional stock brokerages and money managers charged their clients.
Most professional stock pickers don't beat the market (as represented by the S&P 500), at least not for long. Many people who want to save for retirement or invest for other long-term goals are better off buying index funds, such as the Vanguard S&P 500 ETF (NYSEMKT: VOO), as core pieces of their portfolio, rather than relying on individual stock picks.
Over the past 16 years, VOO has delivered average annual returns of 15% while charging some of the lowest fees in the industry -- its expense ratio is only 0.03%.
Another famous Bogle quote that reflects this idea is "Don't look for the needle in the haystack. Just buy the haystack!" Most individual stocks fail to beat the market in the long run. You don't have to pick stocks. You don't have to beat the market. Even if you "only" earn the same average return as the S&P 500, you can build significant wealth in the long run.
...And hold it forever
Along with his belief in diversification, Bogle encouraged investors to be patient and take a long-term approach. Once you buy the stock market, hold it forever. As Bogle said, during times of stock market sell-offs and volatility, "Don't do something -- just stand there." Try not to constantly make trades or adjust your portfolio. Try not to overreact to bad news headlines or short-term declines in the stock market.
Bogle is a hero of mine because he made investing in the stock market more affordable and accessible to millions of people. Today, as many investors worry about a possible artificial intelligence (AI) bubble or bear market, Bogle's advice is still relevant. Don't be tempted to time the market or make short-term speculative moves. Just keep buying low-cost index funds. The stock market tends to deliver strong returns for investors who are patient, disciplined, and committed to the long term.
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Ben Gran has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
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