I would always advise young people to follow their star - not my star. They have to live their own life. If they decide they want to go into the investment business, do it, but make it a better business than it is today.
The miracle of compounding returns has been overwhelmed by the tyranny of compounding costs.
Interpretation
What this quote means
Bogle highlights the importance of managing costs in investing, as they can significantly erode returns over time.
In this quote, John C. Bogle emphasizes how the powerful effects of compounding returns on investments can be easily negated by the rising burden of compounding costs. This serves as a caution to investors, pointing out that while returns can grow exponentially over time, excessive costs can diminish those benefits and lead to poorer financial outcomes. Hence, it is essential to keep investment costs low to maximize the benefits of compounding.
Themes
In practice
Example use cases
During a financial seminar, I shared Bogle's quote to underscore the significance of cost management in investments.
More from John C. Bogle
All quotes βWhen our financial system - essentially our money managers, marketers of investment products and stockbrokers - put up zero percent of the capital and assume zero percent of the risk yet receive fully 80% of the return, something has gone terribly wrong in our financial system.
Entrepreneurs or international conglomerateurs, or large financial institutions buy or create mutual fund management companies to create a return on their own capital. It's capitalism at work, where the rewards tend to go to the managers rather than the investors.
Net return is simply the gross return of your investment portfolio less the costs you incur. Keep your investment expenses low, for the tyranny of compounding costs can devastate the miracle of compounding returns.
Investing is a virtuous habit best started as early as possible.
Wise investors won't try to outsmart the market.
Similar quotes
Investors must keep in mind that there's a difference between a good company and a good stock. After all, you can buy a good car but pay too much for it.
It's not a stretch to say the whole financial industry revolves around the compass point of the absolutely safe AAA rating. But the financial crisis happened because AAA ratings stopped being something that had to be earned and turned into something that could be paid for.
When I hear complaints about less liquidity, remember there is such a thing as too much liquidity.
Donβt buy luxuries until youβve built the assets to afford them
When growth is slower-than-expected, stocks go down. When inflation is higher-than-expected, bonds go down. When inflation is lower-than-expected, bonds go up.
If I was counselling an individual, and my purpose was to help that individual, the most important thing would be that you should save more. Because don't expect that your retirement will follow those trajectories that some advisers are telling you.