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From the book Bogle on mutual funds published in 1994.. we look at the epilogue called Twelve Pillars of Wisdom.. here goes (1/n)
1. Investing is not nearly as difficult as it looks: where financial markets are highly efficient, there is no reason careful and disciplined novices will have to lack behind long term returns earned by pros (2/n)
2. When all else fails, fall back on simplicity.commit over a period of few years, half of your assets to a stock or index fund and half to bond index fund. Hold your positions as long as you live subject to marginal adjustments (3/n)
3. Time marches on. With time magic of compounding accelerates (4/n)
4. Nothing ventured , nothing gained. It pays to take reasonable interim risk in search for higher long term returns (5/n)
5. Diversify ..Diversify diversify. Yes. Sounds like dirty picture ..entertainment..entertainment.. entertainment. But the buzzword for investing is diversification. It lowers risk. If your fund doesn't have it then dump it (6/n)
6. The eternal triangle..risk return and costs are there sides of the investing triangle. Cost penalty can erode the risk premium that investor is entitled. Love triangles are about emotional returns. Investing triangles are about expense ratios. Just go for low expenses. (7/n)
7. The powerful magnetism of the mean. Mean pulls the returns of an acclaimed manager towards the average. Regression to the mean is reality. The smartest fund manager eventually will reflect average fund manager. And all fund managers will reflect the index (8/n)
8. Do not overestimate your ability to pick up the best funds. No analysis of past assures future superiority. Example..Salman Khan movies. (9/n)
9. You may have stable principal value or a stable income stream but you may not have both (10/n)
10. Beware of fighting the last war.. don't ignore the past but don't assume that a particular cyclical trend will last forever (11/n)
11. You rarely, If ever, know something the market does not. Your opinions are reflected in the market. Dont believe that you have all the information. Even Gabbar Singh did not have it. (12/n)
12. Think long term.. ignore noise or daily volatility. Patience and consistency are valuable assets for intelligent investors. Remember..even Thakur had to wait for years to kill Gabbar Singh. (13/n)
I took the liberty to explain These twelve pillars of Wisdom as a fun exercise. Sometimes the logic is nutty the heart is in the right place (14/end)
