"Don't Count On It!" -- A Gem by Jack Bogle

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Taylor Larimore
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"Don't Count On It!" -- A Gem by Jack Bogle

Post by Taylor Larimore »

Mr. Bogle’s latest book, Don’t Count On It!, is a valuable collection of many of his best writings and speeches and written with his vast experience, research, knowledge and literary excellence. These are excerpts that will make us better investors -- and better human beings:
“My goal in writing Don’t Count on It! is not only to make you a wiser and more successful investor, but to make you more aware of the chinks in the armor of today’s financial system.”

“This book attempts to explain how our society got to the place it is today and how we can begin to repair the widespread damage we have suffered.”

“I grew up in a family of extremely modest means. I’ve delivered papers; I’ve waited on tables; I’ve clerked in two post-offices, been a runner for a brokerage firm, and an intern reporter for a newspaper. I’ve managed a ticket office, served as a camp counselor, I surveyed consumers, and shipped gift packages. Whatever it took, I did it."

“When the newly formed Vanguard began operations in May 1975, I had realized my dream of establishing the first truly mutual mutual fund complex. The next item at the top of my agenda: An index fund.”

“While ideas are a dime a dozen, even the best of them require implementation to bring them to fruition.”

“My family’s longtime motto: ‘Press on, regardless.’”

“In 1960, barely 31 years old, I suffered the first of many heart attacks that would follow.” (Mr. Bogle had a heart transplant in 1996.)

“The intellectual foundation of indexing is based, not on some notion of ‘efficient markets,’ but on low costs, wide diversification, and tax-efficiency.”

“Vanguard’s growth is, to me at least, living proof that enlightened idealism is sound economics.”

“While recent financial innovations have created fabulous profits for Wall Street, most have hurt those who invested in them.”

“Every day I see numbers that, if not outright lies, are gross distortions of reality. Don’t count on it.”

“When we rely on the past to help us foretell the future, we are all-too-likely to reach invalid conclusions.”

“The earliest stock return data for most of the 19th century isn’t really valid because it excludes 97% of all stocks that then existed.”

“The world changes, in ways unimaginable and unpredictable.”

“I pray that my company will ever see itself, putting the will and the work of a business enterprise in the service of others.”

“The real market of intrinsic value ultimately triumphs over the illusory expectations market of speculation, hyperbole, and self-interest.”

“I challenge the growing trend in our society to give numbers a credence that they simply don’t deserve, all the while assigning far less importance to the things that can’t be expressed with numbers – qualities such as wisdom, integrity, ethics, and commitment.”

“During the two-decade period 1983-2003, a fund emulating the S&P index earned a cumulative return of 1,012%. In remarkable contrast, the average equity fund reported a cumulative return of just 573%, and the investors in those very same funds averaged a gain of less than one-half that amount, only 239% (buying and selling at the wrong time).”

“Ironically, the financial sector seems to prosper in direct proportion to the volume of the devilishly convoluted instruments that it creates—immensely profitable to their creators, but destructive to wealth of those who purchase them.”

“(Vanguard) contributions to the world of finance: Our unique mutual structure; the index fund; the three-tier bond fund, our simple investment philosophy, and our overweening focus on low cost.”

“Our core investment strategy is the index fund—a fund that, at its best, simply owns the entire stock market (or the entire bond market).

“I align myself with Albert Einstein’s view: ‘Not everything that counts can be counted, and not everything that can be counted counts.’”

“Is it wise, or even reasonable, to rely on the stock market to deliver in the future the returns it has delivered in the past? Don’t count on it!”

“Our best defenses against numerical illusions of certainty are the immeasurable, but nonetheless invaluable, qualities of perspective, experience, common sense, and judgment.”

“What we loosely describe as creative accounting is only a small step removed from dishonest accounting.”

“Wise investors can totally avoid both the Scylla of costs and the Charybdis of taxes by education themselves.”

“While they cannot be measured, character, integrity, enthusiasm, convictions, and passion are every bit as important to a firm’s success as precise measurements.”

“It’s amazing how difficult it is for a man to understand something if he’s paid a small fortune not to understand it.” (Upton Sinclair quote)

“RTM (Reversion to the Mean) – The pervasive law of gravity that prevails in the financial markets—never stops.”

“Each and every comparison we see is period dependent."

“Whether markets are efficient or inefficient, investors as a group must fall short of the market return.”

“In investing, all of us together get precisely what we don’t pay for.”

“Mutual funds have moved from stewardship to salesmanship.”

“Our corporations, pension managers, and mutual fund managers have too often put their own financial interests ahead of the interest of the principals whom they are duty-bound to represent, those 100 million families who are the owners of our mutual funds and beneficiaries of our pension plans.”

“The past is not prologue. Indeed, it is usually anti-prologue.”

“Place me squarely in the camp of the contrarians who don’t accept the inherent superiority of value strategies over growth strategies.”

“Like Dr. Fama, I believe that the market portfolio is the most sensible decision.”“We may know what will happen, we never know when.”

“Rather than relying on hope, never a good idea in the stock market, rely on asset allocation that focuses on not only the probability of reward, but the consequences of risk.”

“Success in investing will depend on your ability to realize, at the heights of ebullience and the depths of despair alike, that this too shall pass away.”

“I passionately subscribe to these simple principles of balance, diversification, and focus on the long term—to say nothing of being skeptical that stockpickers and market forecasting wizards can, on balance and over time, add value.”

“Gross return in the financial markets, minus the costs of the system ($528 billion in 2007), equals the net return actually delivered to investors.”

“A 2006 study by Bergstresser, Chalmers, and Tufano finds that adviser asset allocations were no better than allocations those investors made on their own.”

“I created a method of investing that deliberately and purposefully ignored analysis, accounting, and research.”

“When the dumb investor realizes how dumb he is and buys a low-cost index fund, he becomes smarter than the smartest investors.”

“Using the index mutual fund as the core, if not the entirety, of a diversified equity mutual fund is now dogma in college and business school finance class. It is advocated, as far as I can tell, by almost every American who has won the Nobel Prize in Economics.”

“Individual investors held 92% of all stocks in 1950 but hold only 30% today.”

“A once noble industry that had been a profession with elements of a business, became a business with elements of a profession. It is time to begin the world anew, and build a fiduciary society in which stewardship is our talisman.”

“Our society, I think, is measuring the wrong bottom line: form over substance, prestige over virtue, money over achievement, charisma over character, the ephemeral over the enduring.”

“Wall Street marketers and entrepreneurs loved this new system of speculation in complex products, quantification, innovation, and unconstrained risk, for it makes them billions in profits.”

“Alas, past performance is not only not predictive of the future, but, at least in speculative markets, predictive of quite the opposite.”

“On October 19, 1987 the Dow Jones Industrial Average dropped from 2246 to 1738, an astonishing decline of 508 points or almost 25 percent. In the stock market, anything can happen.”

“While the S&P 500 was off 38% in 2000-2002, the total return of the average large technology fund was a staggering minus 71 percent.”

“Metaphorically speaking, the fact that the only swans we humans have ever observed are white doesn’t mean that no black swans exist.”

“Any seasoned investor knows that a pairing of returns that are both high and consistent is truly oxymoronic. Yet Madoff attracted wealthy investors who thought of themselves as part of the ‘smart money’ crowd.”

“While we look for corroboration of what we believe (confirmation bias), what we really ought to be looking for is the opposite—that observation that would prove us wrong.”

“It took a long time to create this economic crisis, and it will take a long time to fight our way out of it.”

“It costs money to trade securities—commissions, spreads, and market impact costs—conservatively estimated at one-half to one percentage point per year of return.”

“One veteran industry leader has stated that ‘Mr. Bogle’s view of ethics may be somewhat outside the mainstream.’ He was, of course, quite right.”

“The challenge in picking funds, dare I say, has become roughly akin to the challenge in picking individual stocks.”

“Today’s yield on a bond fund is an excellent proxy for its total return in the subsequent decade.”

“I’ve come to the conclusion that advertising fund performance is inherently misleading. It should simply not be allowed.”

“Most investors don’t know about, or don’t use, or perhaps don’t even understand, the abundant information they have today.”

“I’ve long made my position clear that ETFs, index funds that one can trade ‘all day long, in real time’ (as the advertisement says), and overwhelmingly focused on narrow, even minuscule, sectors of the market, are likely to do investors more harm than good.”

“A Business Week article describe them (equity-linked annuities) as ‘a sucker’s game dressed up to look like a free lunch’

“We know that complexity is usually associated with higher, and often hidden--costs, and with higher--and usually undisclosed--risks.”

“The index fund is one way, and almost always the best way, for investors to capture their fair share of the returns generated by American business.”

“Broad diversification, low cost, minimal portfolio turnover, and tax-efficiency conquer all.”

“I favor the all-market index fund as the best choice for most investors. – My instinctive feeling is that the use of segment funds is unlikely to add long-run value to the total market return.”

“I know of no serious academic, professional money manager, trained security analyst, or intelligent individual investor who would disagree with the thrust of the EMH (Efficient Market Hypothesis).”

From December 1980 to December 2005, the Vanguard Index 500 earned a compound annual rate of return of 12.2% per year, compared to a rate of just 9.9% for the average equity fund.”

“(Dr. Samuelson) declared that the creation of the first index mutual fund all those years ago was the equivalent of the invention of the wheel and the alphabet.”

“In the mutual fund industry, intermediation costs total at least 2.5% annually.”

“In the fund business you get what you don’t pay for!”

“While sector ETFs themselves frequently have the lowest expense ratios in their fields, they can run three to six times the level of the lowest cost all-market index funds.”

“Over the past decade, fully 98%(!) of all investment dollars flowing in equity mutual funds in the nine Morningstar style boxes was invested in funds awarded five stars or four stars.”

“Academic studies show that the positive risk-adjusted returns (Alpha) that distinguish the four and five-star funds before they gain the ratings typically turn negative afterward.”

“Placing service to others before service to self is not only an essential part of whatever success may be, it is the golden rule for a life well lived.”

“Intermediation costs, it turns out, are the only reliable predictors of future relative returns of mutual funds. (No, past performance doesn’t do the job.)”

“There’s a simple, undeniable fact here: The winning strategy is long-term investing; the losing strategy is short-term trading.”

“It is commonplace that when investors act on the eternal stock market emotions of hope, greed, and fear, they make the wrong choices.”

“Whereas the duration of that pattern of reversion to the mean is not predictable, the pattern itself is as sure a phenomenon as can be witnessed in the stock market.”

“We have ignored the crucial lesson: Simplicity trumps complexity.”

“Just stand there remains the winning strategy.”

“The small, privately held organizations managed by investment professionals that were the foundation of this industry when I joined it in 1951 have been replaced, largely by giant publicly owned financial conglomerates that are in the business to earn a return on their capital, not a return on yours.”

“The magic of compounding: The value of $1,000 invested in stocks in 1872 would have grown to $27,710,000 in 1992.”

“Don’t think you know more than the market, nor act on insights that you think are your own but are in fact shared by millions of others.”

“To be a successful investor you need information. If information about the past returns earned by funds—especially short-term returns—is close to meaningless, information about risks and costs is priceless.”

“Diversify, diversify, diversify. By owning a broadly diversified portfolio of stocks and bonds, only market risk remains.”

“It takes wisdom to know what you don’t know.”

“Invest you must. The biggest risk is the long-term risk of not putting your money to work at a generous return, not the short-term – but nonetheless real—risk of market volatility.

“Stay the course. No matter what happens, stick to your program.”

“The one great—and largely unrecognized – idea of investing is this: Costs matter.”

“Our institutions have a large incentive to favor the complex and costly over the simple and cheap — quite the oppose of what most investors want and need.”

“The soundest way to participate in the long-term growth of our nation is simply to own the stocks of all the businesses in America, to own them at rock-bottom agency costs, and to hold them forever.”

ETFs are enriching the coffers of financial entrepreneurs, fund management companies, stockbrokers, and certain investment advisers; it remains to be seen whether they’ll enrich the investors who trade them.”

“Greed, recklessness, and self-interest ride in the saddle of today’s capitalism and it is high time we undertake the necessary reform.”

“Fame, too, is a flawed measure of success. -- Most of those who make the greatest contributions to the daily working of our society never experience even a moment of fame.”

“I first met Taylor in 1999, and continue to enjoy spending time with him at the annual Bogleheads forums.”

Walter Morgan’s high values—especially his unyielding integrity and uncompromising honesty—reinforced my own values, and made me a better person.”

“Remember always that even one person can make a difference. And do your part to begin the world anew.”
Thank you, Jack. You have made a difference to millions of investors all over the world.

Collection of Investment Gems
"Simplicity is the master key to financial success." -- Jack Bogle
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Barry Barnitz
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Added to wiki

Post by Barry Barnitz »


We have added Taylor's latest gem to the wiki.

Please see Taylor Larimore's Investment Gems on the Bogleheads Wiki.

Additional administrative tasks: Financial Page bogleheads.org. blog; finiki the Canadian wiki; The Bogle Center for Financial Literacy site; La Guía Bogleheads® España site.
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Post by graveday »

Thank you for compiling that Taylor, and I see you got one about yourself in there.
My favorite; You get what you don't pay for.
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Post by cinghiale »

Another excellent compilation of "gems." Thank you for taking the time and making the effort to make them available to the forum.
"We don't see things as they are; we see them as we are." Anais Nin | | "Sometimes the first duty of intelligent men is the restatement of the obvious." George Orwell
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Post by chaz »

cinghiale wrote:Taylor,
Another excellent compilation of "gems." Thank you for taking the time and making the effort to make them available to the forum.
I agree.
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Post by chaz »

"Thank you, Jack. You have made a difference to millions of investors all over the world."

I'm one of them.
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Post by DriftingDudeSC »


I received an email that Mr. Bogle's new book can be preorder. Below is a copy & paste of my email:

Dear Amazon.com Customer,

As someone who has purchased or rated books by Taylor Larimore, you might like to know that Don't Count on It!: Reflections on Investment Illusions, Capitalism, Mutual Funds, Indexing, Entrepreneurship, Idealism, and Heroes will be released on November 2, 2010. You can pre-order yours at a savings of $10.18 by following the link below.

Don't Count on It!: Reflections on Investment Illusions, Capitalism, Mutual Funds, Indexing, Entrepreneurship, Idealism, and Heroes
John C. Bogle
List Price: $29.95
Price: $19.77
You Save: $10.18 (34%)

Release Date: November 2, 2010

The link may not work but one can visit Amazon's site.
Also Taylor was mentioned in the book. :P
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Post by exoilman »

Thanks Jack and Taylor. I have followed your wisdom for at least two decades.

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Post by JoeBob »

Thanks Taylor. Like Jack, you too have made a positive difference in the lives of many.

Bob H
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