Jack Bogle’s advice for anyone starting to save for the long haul
Jack Bogle not only founded Vanguard and launched the first index fund for individual investors, but he also gave a lot of advice to retirement savers.
His tips can be especially helpful for people who start their financial journey later than usual, and are saving their money for their dream retirement. Here are four of his tips that might help.
1. Keep fees low
Luxury vacations, front-row concert seats and other expensive purchases may need to move forward as you improve your finances. But it’s important to save in your investment portfolio, too. Bogle was a fan of keeping costs down.
A fund that charges 1% may not seem like much, but those fees can add up dramatically over a decade and eat away at your savings over time. For example, a payment of 1% on $100,000 results in a payment of $1,000. Over 10 years, that’s $10,000 that could have gone toward your retirement.
Fortunately, there are many inexpensive options. You can find plenty of index funds with fees as low as 0.1%.
2. Time in the market exceeds time in the market
If you dream of making tons of money by timing the market, you are not alone – especially the investors who rush to social media today to share the extreme profits of happiness and catastrophic losses. Bogle used to assert that time in the market outperforms the market.
Investing in equities over many years can put you in a better position during retirement than buying and selling based on market movements. A 10-year window may be enough to reach at least some of your long-term financial goals if you invest in long-term assets and use smart financial practices. While bonds are a good investment that can reduce risk, late bloomers should remember that stocks have more potential for long-term growth. A well-balanced and diversified portfolio for a retiree may include both stocks and bonds.
3. Avoid panic selling
Late savers can’t go back and start investing in their 20s, but they can control their current actions, which influence future outcomes. While it is easy to buy and hold long-term assets when the stock market is rising, doing so can be more difficult when stock prices are falling. But the legendary investor was adamant that he should not panic about selling during the downturn. If you sell at low prices, you lock in losses and reduce your exposure to the stock market when it recovers.
We repeat this lesson over and over again. For example, investors who sold their shares in March 2020 when the Covid-19 pandemic started and stayed for a month missed out on the return of other investors who benefited from it later that year and had to watch it all happen from the sidelines.
4. Focus on the long term, not speculative investments
Bogle was the last advocate of making investing easy. While it’s tempting to invest in popular, speculative currencies like crypto and meme stocks, doing so requires taking a risk that may not pay you much.
Instead, focus on investing in assets that have proven their ability to help investors achieve their long-term goals, and stick to long-term thinking.
