John C. Bogle,The founder of
The Vanguard group,the world's largest no load mutual fund company, was named by Fortune as one of the four financial giants of the 20th century.In his best selling work,BOGLE ON MUTUAL FUND,he spelt out the"12 pillars of wisdom"
1. INVESTING IS NOT NEARLY AS DIFFICULT AS IT LOOKS
succesful investing calls doing just few things right and guarding against serious mistakes
2. WHEN ALL ELSE FAILS ,FALL BACK ON SIMPLICITY
the simplest policy for an investor would be to commit half of the assets to a stock index fund and the rest to the bond index fund and ignore short term fluctuations
3.TIME MARCHES ON
magic of compounding
4.NOTHING VENTURED,NOTHING GAINED
take reasonable interim risk to earn higher longterm rates of return
5.DIVERSIFY,DIVERSIFY,DIVERSIFY
Investment in mutual funds eliminates ownership risk
6.THE ETERNAL TRIANGLE
risk return and cost are the 3 sides of the triangle
7.THE POWERFUL MAGNETISM OF THE MEAN
returns try to regress toward the mean,implying that returns falls after exceeding historical norms by wide margins and vice versa
8.DO NOT OVERESTIMATE YOUR ABILITY TO PICK SUPERIOR EQUITY MUTUAL FUNDS, NOR UNDERESTIMATE YOUR ABILITY TO PICK SUPERIOR BONDS AND MONEY MARKET FUNDS
9.YOU MAY HAVE A STABLE PRINCIPAL VALE OR A STABLE INCOME STREAM BUT YOU MAY NOT HAVE BOTH
10.BEWARE OF "FIGHTING THE LAST WAR"
too many investors base their decision on their experiences of the recent past.While the past should not be ignored,remember that no cyclical trends last forever
11.YOU RARELY,IF EVER, KNOW SOMETHING THAT THE MARKET DOESNOT
12.THINK LONGTERM
BOGLE SAYS "THE BEST RULE IS :STAY THE COURSE"
Edited by Mamta - 28/Jul/2006 at 1:26pm
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