How to Invest Like a Boglehead
John Bogle believed investing could be simple and affordable.
Few figures in investing have been as influential as John Bogle. The founder of the investment firm Vanguard who brought low-cost index funds to the masses continues to attract a loyal following even beyond the grave. They call themselves Bogleheads, and like their namesake who died in early 2019, they want to make investing simple.
The financial industry and financial media are awash with people handing out the latest stock tips or talking up their funds that beat the stock market last year. But to Bogle, picking stocks or winning fund managers was futile. The average investor will never beat the market over the long-term with an active strategy, even if they’ve had a few good years. Performance tends to revert to the mean.
Bogle believed investing should be simple and affordable for the everyday investor. And in 1976, he made it happen when Vanguard launched the first index fund available to retail investors, the First Index Investment Trust that tracked the S&P 500.
The Bogleheads congregate on the forum of the same name to discuss a wide range of financial topics, including but not limited to the ideas distilled by Bogle. Users post their net worth and ask others if they have enough to retire. Other members of the forum will chime in with feedback. On bad days in the stock market, investors, experienced and inexperienced alike, ask if now is the time to get out of the market or move to bonds or cash. There is only one right answer for a Boglehead: Stay the course.
The Boglehead investing philosophy values simplicity above all else, exemplified by the three-fund portfolio: One that tracks the U.S. stock market, one that tracks the rest of the world’s stock market and one that tracks the U.S. bond market. You can create this portfolio with Vanguard mutual funds:
Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)
Vanguard Total International Stock Index Fund Admiral Shares (VTIAX)
Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX)
Or use the ETF equivalents:
Vanguard Total Stock Market ETF (VTI)
Vanguard Total International Stock ETF (VXUS)
Vanguard Total Bond Market ETF (BND)
You don’t need to follow the three-fund portfolio exactly. Some Bogleheads choose an S&P 500 index fund over a total stock market index fund. Some add treasury inflation-protected securities (TIPS) to their bond allocation. Not everyone will need bonds at all depending on their age. And there’s an endless debate on the forum over whether you truly need to invest internationally (Bogle argued that by investing in American companies, you were already exposed to the international market).
But the point is that investing doesn’t have to be complicated. You don’t need a portfolio of dozens of stocks. You don’t need to chase the latest fund. And you can manage your investments yourself. You don’t need to pay anyone else to do it.
Bogleheads follow a set of 10 principles that come from Bogle himself:
Develop a Workable Plan
Invest Early and Often
Never Bear Too Much or Too Little Risk
Diversify
Never Try to Time the Market
Use Index Funds When Possible
Keep Costs Low
Minimize Taxes
Invest With Simplicity
Stay the Course
That last one is the hardest, as irrationality can creep in and influence any investor, even those who’ve followed the first 9 principles. But without it, the whole plan falls apart. No matter how painful the ups and downs of investing get, sticking to your plan is the way to go. If you invest regularly and systematically in index funds (paying no attention to what the market is doing) using tax-advantaged accounts when you can and do that until you retire, you’re already well on track for success.
But these are just guiding principles. Not every Boglehead is so dogmatic.
Not all self-proclaimed Bogleheads or frequenters of the forum stick strictly with market-cap weighted index funds. Many like tilting their portfolios — investing in your standard total market funds but adding in small percentages of something more exciting, like value funds, growth funds or more recently, thematic ETFs like ARK.
You don’t need to have your accounts at Vanguard to be a “true” Boglehead either. In fact, many Bogleheads these days feel that Vanguard has lost its way and frequently complain about technical issues, opting to go with Fidelity or Schwab instead.
Investing exactly like John Bogle recommended doesn’t need to be the way you invest. It’s not exactly the way I invest, although it’s close. But for the vast majority of people, it’s likely the best choice and the one that results in optimal long-term results.
There’s a lot we can learn from Bogle and the Bogleheads who keep his ideas alive. Investing can be complicated, but it can also be simple. Investing can be intimidating, but by holding on and staying the course it’ll all be ok in the end.