April 19, 2021 | Company News

Five investing principles that are built to last

Markets are unpredictable and investment fads come and go. Already in 2021, we've seen speculative behavior around AMC and Gamestop and overheated trading based on emotions rather than fundamentals. At Vanguard, we believe you can help your clients stay on the path to long-term financial success by avoiding trends and focusing on balance, discipline, and diversification.

In his new book, More Straight Talk on Investing: Lessons for a Lifetime, former Vanguard CEO Jack Brennan provides a timely antidote to today's headlines. He shows—in a simple, straightforward manner—how to help clients develop a sound investment program for the long term, evaluate funds and ETFs (exchange-traded funds), and manage risks and taxes.

He also outlines 12 timeless principles that can help you guide clients through the financial markets over time. Below are five of those enduring lessons learned through interactions with Vanguard crew, and partnership with advisors and clients around the world.

Five principles to guide your clients on their financial journey

Your clients can't control the markets, the economy, or the performance of an individual security. As their advisor, you can, however, give them the best chance for investment success by helping them take ownership of their finances in a sensible way. Here are five lessons to share with your clients.

Develop a financial game plan

First, establish clear, attainable goals and create a plan that will help you reach them. Be conservative in your projections about how fast your money will grow. By avoiding impractical saving or spending requirements, you can help keep your plan on track.

Become a disciplined saver

Four key words for building a secure financial future are "live below your means." Make a habit of putting money away. If saving money doesn't come naturally to you, find creative ways to make it a fun challenge. Consider what changes you're willing to make to set aside a little more for your future.

Invest with balance and diversification

Create a sound investment strategy by choosing an asset allocation that uses broadly diversified funds and considers your goals, time horizon, and risk tolerance.

Control your costs

While you can't control the markets, you can control your investment costs and taxes. The less you pay for funds, the greater your share of the investments' potential returns. Be sure to avoid funds with high expense ratios. The average Vanguard mutual fund and ETF expense ratio is 83% less than the industry average.*

To minimize taxes, consider tax-efficient investments like index mutual funds and ETFs. IRAs are another way to mitigate the impact of taxes.**

Maintain a long-term perspective

Over time, you’ll experience both good and challenging times that can evoke various emotions. Resist the urge to make impulsive decisions. Taking a disciplined approach that keeps you focused on your long-term objectives is a winning strategy for all seasons.

Purchases and proceeds

If you or your clients want to take a closer look at More Straight Talk on Investing, the publisher is offering a 30% discount at wiley.com using code MST2E.

Copies are also available at the regular price through Amazon and other retail booksellers.

All proceeds from the book will be donated to Vanguard Strong Start for Kids ProgramTM, the firm’s signature charitable initiative that invests in tomorrow by supporting the development, learning, and joy of young children today.

Vanguard is not affiliated with either wiley.com or Amazon.

*Vanguard average expense ratio: 0.09%. Industry average expense ratio: 0.54%. All averages are asset-weighted. Industry averages exclude Vanguard. Sources: Vanguard and Morningstar, Inc., as of December 31, 2020.

**When taking withdrawals from an IRA before age 59½, you may have to pay ordinary income tax plus a 10% federal penalty tax.

Biographies

Jack Brennan joined Vanguard in 1982 and served as chief executive officer from 1996 to 2008 and chairman of the board from 1998 to 2009. Currently, he serves as chairman emeritus and senior advisor. He's been in the investment management business for nearly 40 years.

John Woerth is a senior communication advisor who most recently led Vanguard's Public Relations and Strategic Communications functions. He's held a number of communications positions since joining the company in 1986. John assisted in updating Mr. Brennan's new book and he also assisted Vanguard founder John C. Bogle with his books on investing.

Notes:

  • For more information about Vanguard funds or Vanguard ETFs, obtain a prospectus (or summary prospectus, if available) or call 800-997-2798 to request one. Investment objectives, risks, charges, expenses, and other important information are contained in the prospectus; read and consider it carefully before investing.
  • You must buy and sell Vanguard ETF Shares through a broker, who may charge commissions. Vanguard ETF Shares are not redeemable directly with the issuing Fund other than in very large aggregations worth millions of dollars. ETFs are subject to market volatility. When buying or selling an ETF, you will pay or receive the current market price, which may be more or less than net asset value.
  • All investing is subject to risk, including the possible loss of the money you invest. Be aware that fluctuations in the financial markets and other factors may cause declines in the value of your account. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income. Diversification does not ensure a profit or protect against a loss.