Jack Bogle's wisest retirement investing advice

Jack Bogle founded a financial services company, The Vanguard Group, that now has 16,600 employees and more than $5 trillion in assets. Bogle, who died last week at 89, could have parlayed that success into an unmatched fortune, but he proudly proclaimed that he was never close to becoming a billionaire. Instead, he focused on helping other people build wealth for retirement.

"Jack could have been a multibillionaire on a par with Gates and Buffett," said William Bernstein, an Oregon investment manager and author of 12 books on finance and economic history, as quoted in The Inquirer's Bogle obituary. Instead, Bogle's Vanguard "exists to provide its customers the lowest price. He basically chose to forgo an enormous fortune to do something right for millions of people. I don't know any other story like it in American business history."

How did he do it? The short explanation: Bogle was essentially the father of index funds, mutual funds that keep fees low by simply buying stocks tied to stock-market indexes, rather than using highly paid fund managers to buy and sell shares aiming to beat the market. Bogle launched Vanguard in 1974 and the company's first index fund, the Vanguard 500 Index Fund, two years later. Index funds been rising in popularity ever since.

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But Bogle also became something of a sage with a devoted following of investors: bogleheads. These investors are committed to his brand of low-fee, low-stress investing. It's an approach that has enabled millions of Americans once shut out of the world of high finance to build wealth and prepare for a worry-free retirement.

His advice was simple, and consistent across his many books, papers, and interviews. In the flood of coverage of Bogle's influence published since his death, several publications, including MarketWatch and CNBC, mined an essay Bogle wrote about his investment strategies in the CFA Institute's Financial Analysts Journal to provide a list of his seven essential tips:

In truth, even that list is a bit longer than necessary. For one thing, you can fold Tips 3 and 7 into what Bogle described as his most basic rule: Once you've picked a smart investment plan, stick with it. The New York Times this month put "Stay the Course" at the top of a list of five Bogle investment tips. "Wise investors won't try to outsmart the market," Bogle said, as quoted in the Times. "They'll buy index funds for the long term, and they'll diversify." The Times' list also included "Beware the experts," a logical next step, because if you're going to stay the course you've got to tune out the chatter from "highly skilled, highly paid" experts, most of whom missed the warning signs before the financial crisis, as Bogle noted.

Even on the Times' shorter list, the remaining tips — "Keep costs down," "Don't get emotional," and "Own the entire stock market" — can be boiled down to the foundation of Bogle's strategy: Buy just a few index funds covering the entire market — "The S&P 500 is a great proxy," he told The Wall Street Journal last year — and leave it alone until you retire. You should keep pumping in more savings, of course, and keep your balance of stocks and bonds on target, but stick to your plan.

"One lesson is to rely on the math. The fundamental underlying success of indexing is not based on any mystique, it's based on gross returns in the stock market minus cost equals net return," Bogle said. "Hold high the idea of simplicity in investing and avoid trading because trading gives more money to Wall Street and less money to the investor."

If you aren't sold, there's plenty to read about Bogle and his ideas. If you are sold, remember: Once you're in, stay in.

"Buy and hold the total stock market, or the S&P 500, or the total bond market; buy and hold forever," Bogle once told The Street, "and that is the secret of investment success."