10 mistakes every investor makes – Jack Bogle

Jack Bogle is the man behind the Vanguard, and the man starting the index fund investing by launching the first index fund.

Rule #1: Remember reversion to the mean 回归均值

It‘s the eternal rule, it’s the law of gravity, what goes up must go down.

Don’t buy funds on the basis of past performance, because it’s not going to continue, or it’s only the extraordinary case when it’s going to continue.

Rule #2: time is your friends, impulse is your enemy

We have the miracle of compound interest working for us, when you invest over 20 years, 30 years, 40 years, 50 years for today’s young people, an investment lifetime is probably 70 years, the sweeping curve, it’s the miracle of compounding return. it’s paying off hugely, Albert Einstein called compound interest is the greatest financial miracle of all time or something like that.

Rule #3: Buy right and hold tight.

Buy right means diversify, and buy at a low cost.

Rule #4: Have realistic expectations

Bagel and the doughnut, the bagel is nutritious and good for you, while the donut has a certain sweetness, and it kind of breaks up and crumbles when you eat it, so long term investment holding on the strategy I just described is the bagel, and the short term speculation is the donut, just a way to visualize which you want, which is the best for you in the long run,

Rule #5: Forget the needle, buy the haystack.

this is the ultimate argument for indexing picking stocks or funds, finding that elusive needle, that will give you what you think you want in the future, it is very difficult, we all know the metaphor finding a needle in a haystack, it means forget it, it’s not worth trying, and I would argue the same thing here, own the haystack means only the entire U.S stock market or the entire world stock market everybody has different ideas about that, and don’t do anything once you get the haystack, no more looking for needles.

Rule #6: Minimize the croupier’s take

that means get costs out of the equation, and I mentioned to you the magic of compounding returns over the long term, the mathematical magic. but the problem we have in our society is that magic on the record is overwhelmed by the tyranny of compounding long-term costs.

Rule #7: You can’t escape risk

There is inflation which you have no control over, eats away the value of your dollars, you may think you’re being safe if you buy a GIC, but that instrument is going to lose 30% of value conservatively over the next 10 years.

Rule #8: Don’t fight the last war.

We tend to look back, we tend to look at the return, we tend to look at the environment we are in. but it is not always the case.

Don’t listen too closely, it doesn’t repeat itself.

Rule #9: The Hedgehog beats the fox

The Fox knows many things, but the hedgehog knows one great thing, and what the hedgehog know is that ll this fooling around out there does you no good at all. Own the market, it’s another way of saying that.

Buy this and sell that, that’s the fox thing, foxy way to beat the market doesn’t work.

The less sexy index funds outperforming the more active brainiac.

Rule #10: Stay the course

Once you have set an intelligent asset allocation, taking into account risk preference, and stay for the long term.

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