Jack Bogle Q&A: "Ignore Expectations"

03.20.07 | Money, Online Investing | 0 Comments | by junger

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Now that I've begun the process to move my Roth IRAs into Vanguard, I've been doing as much reading as possible into the works of Jack Bogle, founder and CEO of Vanguard.

I just ordered The Bogleheads' Guide to Investing, which has received positive reviews from around the blogosphere. (Many PF bloggers got together to review the book, chapter by chapter. See the recap at AllFinancialMatters.)

Bogle has just written a new book, The Little Book of Common Sense Investing, and to promote it he sat down with Money magazine for a Q&A.

Some of the highlights:

As an investor, you want to ignore the expectations market and instead just trust earnings growth and dividend yields to give you a return over time. And get cost out of the equation. The more your funds' managers make, the less you make.

Question What's the "expectations market"?

Answer Investors spend too much time focusing on what they think other people will think a stock will be worth; that's psychology, not reality. People don't focus nearly enough on what I call the "real market," or the value of real companies run by real people making real products and services.

Sounds like a classic Web-bubble. A bunch of companies that don't have any business plans or ways to monetize, but everyone gets caught up in the hype and throws money without any way of getting it back.

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