Jack Bogle: Follow these 4 investing rules—ignore the rest

Here is the article.

Market goes down, it is good for buyers, not good for sellers. When market goes up, it is good for sellers, not for buyers.

The founder of Vanguard Group, the world’s largest mutual fund company, used to have a really basic portfolio that followed an asset allocation known as the 60-40 rule — 60 percent in a U.S. stock index fund and 40 percent in a U.S. bond index fund. He maintained that allocation for himself for years.

Diversification

It is important for me to learn from John Bogle. I think that I should learn the basics first, how to manage the risk in my portfolio? 

If you are perfectly comfortable with risk, you’d put your asset allocation into a 100 percent stock portfolio and keep it there until you die, because historically, that’s the kind of asset that has produced the best returns over the longest period of time. But an all-equity portfolio in 2007–09 would have been a disaster, a point Bogle made in his book “Common Sense on Mutual Funds.” Your portfolio would have recovered eventually, but what if you needed the money during that time span?

Bogle uses bonds to leaven equity risk in his portfolio. He’s comfortable with a simple portfolio, increasing the bond allocation as he ages, because he wants to reduce the risk of a sudden, massive drop in value.

But you can also use funds that represent other asset classes to reduce volatility, like REITs, international stocks and international bonds. It’s more complicated, but research suggests you will get some benefit in terms of reduced risk and, perhaps, higher returns.

Two things to avoid - Won't sell in a panic or buy in greed

The genius of Bogle’s portfolio, for him, is its simplicity. It’s easy for him to track and understand, and therefore stick to. You might like the challenge of trying to maximize your returns by adding diversification or rebalancing — just be sure you can stick to what you decided and won’t sell in a panic or buy in greed. The fundamental thing you want from your portfolio is a sense that it’s the right choice for you over the long term.

A plan that uses low-cost, diversified investments should take care of the other big risk in investing — emotions-based decision-making. For Bogle, being an investing master isn’t about the exact makeup of his portfolio; it’s about tailoring it to what feels right for him and sticking to it.