The Four Actions of Successful Investors

May 06, 2019 | Kyle Sarai


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The founder of Vanguard the late Jack Bogle wrote an article outlining four ways to be a successful investor. Vanguard is the fourth largest asset manager globally and can contribute their success based on the investment thesis Jack envisioned.
1. Focus on costs - Keeping your investment expenses at the bare-bones level is the surest route to above-average performance over time. If you had a portfolio of $1 million and your annual fee is 1.00% in a market that returns 7% over 20 years compared to paying 1.50% you will save $289,389.
2. Diversify broadly - Absolutely no one knows what the stock market is going to do tomorrow, let alone next year. Nor which sector, style, or region will lead and which will lag behind. Given this absolute uncertainty, the most logical strategy is to invest as broadly as possible, and benefit from the compounding dividend yields and long-term earnings growth.
3. Allocate prudently - Your asset allocation—the mix of stocks and bonds you hold—will probably have a greater impact on your portfolio’s long-term performance than any other single factor. There’s risk in being too conservative or too aggressive. Each investor is different. Your goals and income needs should be reflected in a financial plan which will outline an asset allocation. I.E, if you have millions of dollars saved and your main financial goal is leaving a legacy for your heirs you most likely will want an allocation to capital preservation. On the flip side, if you are less than five years from retirement and your main goal is to save enough to supply an income during your later years you will need to take on a more growth oriented portfolio.
4. Stay the course - Most of the harm to investors’ portfolios comes from their inability to sit quietly in a room. Our emotions cause us to plunge into stocks at their euphoric highs, and to bail out as they reach depressing lows precisely the opposite of what the logic of common sense would prescribe.
 
As always, I am available to go further in detail on our teams strategies and techniques to help our clients through each market cycle. If you have any questions or would like to schedule a meeting please feel free to contact us directly at 604-257-3225 or kyle.sarai@rbc.com.
 
Sincerely, Kyle Sarai, MBA