Vanguard founder Jack Bogle recently told Money that investors need to protect themselves against their “own weaknesses.” In that short statement, Bogle cuts to the bone. Individual investors can’t know everything they need to about the market. Like all “Do-it-yourself” activities, individual investors managing their own portfolios are prone to getting in over their heads. Complicated strategies lead to complicated outcomes. Bogle stresses making simplicity the pillar of any strategy. Money quotes Bogle as saying:
“One thing you have to do is protect yourself against your own weaknesses,” including thinking you are going to be able to make smart decisions about when to shift your dollars around, Bogle said. The Vanguard founder said his personal portfolio is roughly 50-50 stocks and bonds, mostly using index funds. He said a portfolio of only a couple of funds—or even a single stock-and-bond fund such as Vanguard Balanced Index Fund—could be perfectly reasonable.
“Sometimes we complicate simple things,” he said, giving the example of people who think they need to rebalance their portfolios every time the asset allocation varies only slightly from their long-term target asset mix.
Another gem in the interview is Bogle’s take on low fees. Hint: They’re just as important to investment success as they have always been.
Read more about Jack Bogle in this month’s client letter, titled Bogle’s Convictions, from Richard C. Young & Co., Ltd. The letter is a trove of investment insight and it’s free even for non-clients.