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  • Writer's pictureRaj

Learning From Legends about 5 Timeless Investment Lessons

John 'Jack' Bogle, the founder of Vanguard Group, left a lasting legacy in investing. Through his revolutionary concept of index investing, Bogle transformed the mutual fund landscape. This investment strategy allows individuals to invest in mutual funds that track the overall market, making investment accessible and cost-effective for the average person. Let us explore the five investment lessons we can learn from him.

Learning From Legends about 5 Timeless Investment Lessons

Lesson 1: Invest for Long-Term Growth

One of Bogle's key insights was that more than relying on savings is needed for achieving long-term financial goals. Here you can get details with examples.

While investments may entail short-term risks and volatility, the failure to earn adequate returns over time poses a greater risk to one's capital.

Let us assume a consistent 5% inflation rate throughout one's life. If your current monthly expenses amount to $1,000, after 30 years, you would require approximately $4,260 per month to maintain the same standard of living.

Considering a retirement age of 60 and an expected lifespan of 80, you would need around $380,000 to sustain your desired post-retirement lifestyle. Achieving this goal solely through savings is impractical. Investment is the key.

To illustrate, let us compare two scenarios. In the first, you start a systematic investment plan (SIP) in equity mutual funds, while in the second, you save through a recurring deposit (RD). Assuming you can allocate $200 monthly for retirement, let us examine the outcomes after 30 years.


Suppose your Monthly Investment in SIP in Equity Fund is $200 with an Expected Annualized Return of 12% for 30 years. It will give you some of the Total Returns Earned in 30 Years, which is $632,445. Here your total investment is $72,000. Moreover, your total Retirement Corpus is $704,445.

If you choose the same investment amount in RD for the same 30 years, you will get back Total Returns Earned in 30 Years is $140,806. Here your total investment is $72,000. Moreover, your total Retirement Corpus is $212,806.

Now you can realize which one is a better return for your investment.

Lesson 2: Start Early and Harness the Power of Compounding

Bogle emphasized the importance of commencing investments as early as possible to reap the benefits of compounding. Starting early allows your investments to grow exponentially over time, unlocking staggering amounts of wealth.

Even modest investments in the early 20s can yield substantial results over an investment lifetime. For instance, if you start investing at 23, with a monthly SIP of $100 in equity funds, assuming an average annual return of 12%, you could accumulate $1 million by age 60.

On the other hand, if you delay starting your SIP until age 35, you would need to invest approximately $420 per month to reach the same $1 million by age 60.


Starting Age

Investment Period (in Years)

Amount Needed at 60

Monthly SIP Needed



$1 million




$1 million


The advantage of starting early is clear. Time is a powerful ally in the world of investing, enabling your wealth to grow steadily without requiring substantial contributions.

Lesson 3: Resist Impulse and Embrace Rationality

Bogle cautioned against succumbing to impulsive decisions driven by emotions. Investors often make the mistake of selling during market downturns and buying when prices are soaring, letting their emotions dictate their actions.

Bogle believed that if one cannot fathom a 20% decline in the stock market, one should not invest in stocks. Market corrections are natural, and investors should be prepared for a few drops of 20-30% before witnessing a recovery.

The events of March 2020 further validated Bogle's advice. When the Sensex plummeted below 30,000 due to pandemic-related uncertainty, many expected further declines. However, those who sold at that point should have paid more attention to the subsequent rebound over the next nine months.

Investing in stocks should be approached with a long-term mindset, allocating funds that will not be needed for at least five years.

Lesson 4: Consider the Impact of Costs

According to Bogle, low costs are pivotal in delivering higher returns. He urged investors to carefully balance risk, return, and cost when making investment decisions. By opting for low-cost investments, such as index funds, investors can achieve superior returns compared to higher-cost alternatives.

Bogle cautioned against the perils of active trading, which often incurs hefty commissions and fees. Attempting to time the market by investing in sectors at their peak and exiting when they cool down rarely produces consistent returns. Instead, Bogle recommended purchasing low-cost index funds and holding them for the long term, as they replicate the market's performance.

To illustrate the impact of lower costs on returns, let us compare a large-cap index fund with an expense ratio of 0.1% to an actively managed fund with a 1.3% expense ratio.

Assuming an average annual market return of 10%, the index fund will likely deliver a net return of 9.9%. In contrast, the actively managed fund, even if it consistently beats the market with annualized returns of around 10.5%, would provide a net return of 9.2%. Consider a monthly SIP of $1,000 in both funds throughout 10, 20, and 30 years:

The compounding effect of lower costs becomes evident when comparing the total corpus after various timeframes. The index fund consistently outperforms the actively managed fund due to its lower expense ratio, resulting in higher returns for investors.

Bogle emphasized the difficulty of consistently beating the market, further supporting his endorsement of low-cost index funds that closely mirror market performance.

Lesson 5: Stay the Course

Bogle advocated for a steadfast approach to investing, encouraging individuals to remain committed to their investment strategy regardless of short-term market fluctuations. By consistently investing at regular intervals, regardless of market conditions, investors can capture the average market returns over the long term.

He stressed the importance of focusing on the long term and disregarding the noise generated by short-term market volatility. Bogle advised against succumbing to the temptation of chasing hot investment trends or funds. Instead, he recommended holding an index fund throughout the ups and downs of the market, ensuring emotions play no part in investment decisions.

"The winning formula for success in investing is owning the entire stock market through an index fund and then doing nothing. Just stay the course," Bogle asserted.

Bottom Line

John Bogle's investment philosophy, centred around index funds and timeless lessons, has empowered countless individual investors to achieve their financial goals. Bogle revolutionized the investing world by emphasizing the significance of investing, starting early, resisting impulse, considering costs, and staying committed to the long term.

Following Bogle's principles enables average investors to grow their wealth, mitigate risks, and overcome their own biases and emotions. Embracing these lessons will help you navigate the complexities of the investment landscape and build a strong foundation for financial success.


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