Markets are unpredictable and investment fads come and go. Here’s some sound investing advice to help you achieve long-term financial success.
How to invest

5 investing principles that are built to last

Markets are unpredictable and investment fads come and go. Here’s some sound investing advice to help you achieve long-term financial success.
4 minute read
  •  
April 12, 2021
How to invest
Investor goals
Article
Page
Diversifying
Index funds
Investing costs
Market volatility

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 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 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 have helped countless investors like you navigate the financial markets. Below are 5 of those enduring lessons learned through interactions with Vanguard crew and partnerships with clients around the world.

You can’t control the markets, the economy, or the performance of an individual security. You can, however, give yourself the best chance for investment success by taking ownership of your finances in a sensible way.

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

4 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’ 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 reduce 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.

If you want to take a closer look at More Straight Talk on Investing, you can purchase the book at wiley.com for a 30% discount 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™ program, 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.

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*Vanguard average ETF and mutual fund expense ratio: 0.09%. Industry average ETF and mutual fund 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.

For more information about Vanguard funds or Vanguard ETFs, visit vanguard.com to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing.

You must buy and sell Vanguard ETF Shares through Vanguard Brokerage Services (we offer them commission-free) or through another broker (which may charge commissions). See the Vanguard Brokerage Services commission and fee schedules for full details. Vanguard ETF Shares aren’t 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’ll 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. Diversification does not ensure a profit or protect against a loss.