Vanguard's investment philosophy

From Bogleheads

Vanguard provides investment guidance based on four simple principles:[1]

  1. Define clear goals,
  2. invest with balance and diversification,
  3. minimize cost, and
  4. stay disciplined over the long term.

Vanguard's investment philosophy is explained in the following from the Vanguard US website:

  • Create clear, appropriate investment goals. An appropriate investment goal should be measurable and attainable. Success should not depend upon outsize investment returns, nor upon impractical saving or spending requirements.[2]
  • Develop a suitable asset allocation using broadly diversified funds. A sound investment strategy starts with an asset allocation suitable for the portfolio's objective. The allocation should be built upon reasonable expectations for risk and returns, and should use diversified investments to avoid exposure to unnecessary risks.[3]
  • Minimize cost. Markets are unpredictable. Costs are forever. The lower your costs, the greater your share of an investment's return. And research suggest that lower-cost investments have tended to outperform higher-cost-alternatives. To hold onto even more of your return, manage for tax efficiency. You can't control the markets, but you can control the bite of costs and taxes.[4]
  • Maintain perspective and long-term discipline. Investing can provoke strong emotions. In the face of market turmoil, some investors may find themselves making impulsive decisions or, conversely, becoming paralyzed, unable to implement an investment strategy or to rebalance a portfolio as needed. Discipline and perspective are the qualities that can help investors remain committed to their long-term investment programs through periods of market uncertainty.[5]

References

  1. ↑ Vanguard's Principles for Investment Success, Vanguard, 2014. Retrieved from archive.org June 4, 2023.
  2. ↑ Vanguard, Principle 1: Create clear, appropriate investment goals, Vanguard, 2015. Retrieved from archive.org June 4, 2023.
  3. ↑ Vanguard, Principle 2: Develop a suitable asset allocation using broadly diversified funds, Vanguard, 2014. Retrieved from archive.org June 4, 2023.
  4. ↑ Vanguard, Principle 3: Minimize cost, Vanguard, 2014. Retrieved from archive.org June 4, 2023.
  5. ↑ Vanguard, Principle 4: Maintain perspective and long-term discipline, Vanguard, 2014. Retrieved from archive.org June 4, 2023.

External links

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