Jack Bogle

It is not often that an individual comes along that can profoundly impact an industry as did Jack Bogle, who passed away two years ago at the age of eighty-nine.

Bogle was born in 1929 and grew up in a household that lost all of its wealth as a result of the Great Depression during the 1930s. What Jack Bogle is best known for is the founding of The Vanguard Group, a mutual fund family with over $5 trillion in assets under management and its flagship Vanguard Index 500 Fund.

Bogle believed when he founded Vanguard in 1975 that the best way to achieve investment returns on par with the broader stock market was to invest in a basket of stocks that tracked the overall market. In so doing, the investor would obviously be highly correlated to the vast majority of the capitalization of the stock market, all the while limiting management expenses and taxable capital gains.

Over time many would argue that he was proved correct in this theory and as a result hundreds of other passively management index funds have emerged.

We have embraced much of what Bogle espoused regarding correlating investment portfolios to the underlying asset classes as well as minimizing fees and in focusing on the longterm when it comes to allocating assets.

Bogle provided the following. “My advice to investors is to ignore the short-term noise of the emotions reflected in our financial markets and focus on the productive long-term economics of our corporate businesses. Shakespeare could have been describing the inexplicable hourly and daily – sometimes even yearly or longer – fluctuations in the stock market when he wrote, ‘it is a tale told by an idiot full of sound and fury, signifying nothing.’ The way to investment success is to get out of the expectations market of stock prices and cast your lot with the real market of business.” So true.

Quite often do investors fall victim to the short-term noise in the market resulting in an emotional response which ultimately compromises the long-term health of that individual.

Bogle further observes. “As the financial markets swing back and forth, do your best to ignore the momentary cacophony, and to separate the transitory from the durable. This discipline is best summed up by the most important principle of all investment wisdom: stay the course!” How often are investors looking for the silver bullet, a way to time the market? Bogle’s comment of “stay the course” appears almost too simple to be effective.

However, time has again proved that assumption wrong as equity returns have far outpaced those of other asset classes by a wide margin over any meaningful period.

Finally and perhaps the primary reason we at Fagan Associates have operated on a fee basis when providing financial advice and investment planning to our clients can be illustrated by the following quote from Mr. Bogle. “The way to wealth for those in the (investment) business is to persuade their clients, ‘Don’t just stand there. Do something.’ But the way to wealth for their clients in the aggregate is to follow the opposite maxim: ‘Don’t do something. Just stand there.’”

Quite often it is best to let the storm pass and then reassess.

Please note that all data is for general information purposes only and not meant as specific recommendations. The opinions of the authors are not a recommendation to buy or sell the stock, bond market or any security contained therein. Securities contain risks and fluctuations in principal will occur. Please research any investment thoroughly prior to committing money or consult with your financial advisor. Please note that Fagan Associates, Inc. or related persons buy or sell for itself securities that it also recommends to clients. Consult with your financial advisor prior to making any changes to your portfolio. To contact Fagan Associates, Please call (518) 279-1044.