Forget the needle, buy the haystack

This week on WealthTrack, legendary investment crusader John Bogle discusses The Clash of Cultures: Investment versus speculation, his life-long battle against the forces of Wall Street breed in his quest to help individual investors get better returns. Investment pioneer and reformer John Bogle is next on Consuelo Mack, WealthTrack. In your book, The Clash of Cultures, you have ten investment rules for individuals. Time is your friend, what do you mean by that? -Think of the value of compounding. Get yourself have a little compound interest table and see that at 7 percent money doubles every 10 years and then it doubles again, and then it doubles again, and then it doubles again, doubles again and doubles again, and by the time you're at retirement age you can start investing when you're 50, it's multiplied, you have to tell me but let me say, 35 or 40 times over. Unbelievable, maybe even more than that. -Three, buy right, hold tight. -Okay. Buy right, hold tight means don't make mistakes at the start. Make a good plan and hold it through thick and thin and I would argue very strongly if you're looking an actively manage fund and you should be very careful to buy the low cost one even if it's actively managed. But don't get disappointed when it does badly, because it comes and goes. -There's no escaping risk. -Think about that for a minute. I don't like the risk in the stock market. So, put your money in a savings account certificate of deposit. There's no risk there. Wait a minute. The return in there is probably gonna be about 1.5% and we're gonna have 2.5% inflation. So, the real return is essentially and this has been true all of our history that the return on a savings account. The not on-- the [unk], the real return, the annual return, I would say 1.5% at the moment very, very well and it turns in what real return of mine is 1%. -Forget the needle, buy the haystack, buy the whole market. Why? -Yeah. Well, it's because buying a good manager is like looking for a needle in a haystack. And everybody knows what that's about and get all done [unk] out of that right and so, it just makes common sense on the whole market and not just a few stocks. And so, you have [unk] the risk and individual stocks. Like the market raise which is quite high enough. You'll take both. -The hedgehog beats the fox. -The fox knows many things but the hedgehog knows one great thing, and in our business, the fox is all those managers smarter, they got all those computers, all those brilliant Harvard Business School graduate, armies of them and they know everything and they know far more than I could dream in doing. I know one great thing and that is if you own the market, which they do collectively, naturally, and if you own the market, you are guaranteed, you know, a low cost index fund, you are guaranteed to earn your fair share or whatever the stock market is kind enough to give us and let's be very clear on this whatever return be. A bad market just means [unk] enough to take away from us. So, it's the hedgehog who wins and the poor fox with all his wiles in his marketing department who figures out what everybody wants. All those crazy things going on business. He is yesterday and he's going, it's best that I could get rid of him. -And your final rule for investors is stay the course. -The markets are really-- just think about this for a minute. Really countered intuitive because when do you feel you're most optimistic and most happy and enthusiasts of applying stocks? At the market peak. When are you scared to death about stocks and really wanna get out? At the market bottom. So you're getting to top and out of the bottom. Do you think you're gonna do well doing that? So, figure out a sand program, set the right course, and then don't let all these superficial, emotional momentary things get in your way. Another way of putting is, don't do something, just stand there.