Singapore-based financial blog that aims to educate people on personal finance, investments, retirement and their Central Provident Fund (CPF) matters.

Wednesday, 21 October 2015

Jack Bogle 4 Investment Rules

Jack Bogle, founder of the whole's largest mutual fund, Vanguard Group, is a long-term advocate of simple long-term Index investing.
He has a basic portfolio consisting of ONLY US Stocks and US Bonds.
As you grow older, more percentage should shift toward Bonds instead of Stocks.
At 86 years old, his current asset allocation is 50% Stocks 50% Bonds.
This is very different from what most financial books advice regarding asset allocation: taking 100 minus away your age, that should be your stock allocation, and the rest are bonds. This would result in Bogle having only 14% in stocks, which is a little under-invested.

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The 4 rules Bogle set for investing under such investment period:

1. Bogle doesn't rebalance — if you must, once a year is enough.
You reduce the brokerage fees you pay.
You don't end up selling your winners too early just to keep your portfolio "balanced"

2. Bogle doesn't invest overseas — at least, not directly.
He focus only in US because of legal protection available in US for investors. So invest in places that have a safe political and legal playing field.
Simultaneously, US companies also derive more than 50% of their income from overseas (developed and developing markets), so you ain't exactly missing out on overseas investment opportunities and growth!

3. To Bogle, diversification means bonds — and it doesn't need to mean anything more than that.
If you are okay with short-term volatility (aka risk), investing 100% in stocks is not a bad idea because historically, it give the best returns.
However, a little bonds are good for some emergency short-term needs like sudden medical bills - especially when the stock market is not doing very well for the short-term.
Bonds have reduce chances of massive drop in portfolio value

4. Bogle believes that if you make the 'simple' portfolio choices, you'll spend a lot less time worrying.
A simple Low-Cost Index Stock-Bond portfolio with minimum re-balancing will gives him the peace of mind because it is a simple strategy. No need for huge reports or massive phone calls on great investment ideas. 
just a simple monthly investment savings plan will do

Remember to offer your opinions. If you don't put your two cents in, how can you expect to get change?

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