Run Your Race: Money wisdom from Vanguard's Jack Brennan
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[May 19, 2021] By
Chris Taylor
NEW YORK (Reuters) - When it comes to
financial advice, you could do worse than listen to someone who helped
steer more money than almost anyone else on the planet.
When he was chairman and CEO of investment giant Vanguard Group, Jack
Brennan oversaw a company that has since grown to over $7 trillion in
assets. That torch has since been passed – first to Bill McNabb, then to
current chair and CEO Tim Buckley – but Brennan still has plenty of
wisdom to share in his new book “More Straight Talk on Investing,” a
follow-up to the 2002 edition.
An avid marathoner, Brennan sat down with Reuters to talk about how to
pace yourself for the long-distance race of financial security.
Q: A lot has happened since you wrote your previous book, so did your
advice change at all?
A: What has changed for investors in the last 20 years has been very
beneficial. The cost of investing has been falling dramatically, which
is a critical part of being successful. There have been a lot of great
product enhancements, like the ubiquity of ETFs and target-date funds.
And the choice of how to get financial advice today is completely
different. Everything is lower-cost and more available.
Q: Investors since 2000 have gone through so many different types of
markets – how should they navigate all those ups and downs?
A: It comes down to simple stuff. Do your homework, be disciplined, be
skeptical in avoiding fads, keep learning. Those are four elements I
tell people all the time.
Q: Many young investors these days are getting market exposure by buying
individual stocks on apps – does that give you pause?
A: I worry about it a lot. It’s like March Madness on TV. I don’t get
it, personally. If you want to speculate on some individual stocks,
fine, but your core serious money needs to be in a diversified program.
It’s very hard to beat the stock market. There’s an old joke that the
quickest way to make a small fortune is to start with a large one, and
then trade a lot.
Q: What advice do you have on avoiding classic investor biases and
mistakes?
A: We are all subject to emotions when it comes to investing, so there
are a couple of things that are very important. One is to tune out all
the noise. You shouldn’t really care about what is happening today, or
this month, or even this year. I’m 66, and I hope I still have a 30-year
time horizon.
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Former Vanguard Chairman
and CEO Jack Brennan poses in an undated photo released to Reuters
on May 18, 2021. Courtesy The Vanguard Group. The Vanguard
Group/Handout via REUTERS
The second thing is that once a year, you should reaffirm what you’re trying to
accomplish. Think about the issue in buckets: Short-term resources, intermediate
goals, long-term goals. Once a year, maybe on New Year’s Day, sit down and look
at it all. You don’t even have to do anything about it, but stay engaged.
Q: The market is around all-time highs, so any thoughts on where we stand right
now?
A: The market is fully valued, in my opinion. I think we will come strongly out
of this pandemic, and there are a lot of reasons why equities are still an
attractive asset class for most people.
You also enjoy the growth of those underlying companies and valuations. If you
had told me 11 years ago where the market is now, I might have said watch out,
but there are justifiable reasons for it.
Q: An extended bear market will come eventually, so how should investors prepare
for that?
A: It’s important to understand the role a bear market plays, which is to take
all the excess out of valuations. It’s also a great chance, particularly for
younger investors, to put their money to work at lower valuations. Go back and
look at any period of time, even investors through the Great Depression, and you
see that you will be rewarded over time.
Q: In coming years we could see the greatest wealth transfer in human history,
so will young investors be able to handle that?
A: Boomers may not want to pass on quite yet. But if you do inherit money, you
shouldn’t just take somebody else’s advice. You need to be a knowledgeable
consumer yourself. That’s the big opportunity for Gen X and Millennials: To be
smarter about financial issues than my generation was.
(Reporting by Chris Taylor in New York; Editing by Lauren Young and Matthew
Lewis; Follow us @ReutersMoney or at http://www.reuters.com/finance/personal-finance.)
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