What Would Bogle, Buffett & Samuelson Tell Investors?

What Would Bogle, Buffett & Samuelson Tell Investors?

In an interview with Financial Advisor, economist Paul R. Samuelson advises investors to buy stocks and hold them, without trying to time the market, and don’t panic during a decline. Samuelson, the son of Paul A. Samuelson, the Nobel Prize-winning economist whose work influenced Vanguard founder Jack Bogle to create the first mutual fund index accessible to the public and who often conferred with Warren Buffett, also advised not paying more taxes than you need to. “Buy and hold works,” Samuelson told Financial Advisor, citing a 401(k) he opened as a young man, which had a balance of $17,000 when he changed jobs. 30 years later, the account, untouched, had ballooned to $700,000.

With stock and bond prices both depressed, the current environment is unique, but as long as investors’ portfolios are allocated to both diverse stocks and investment-grade bonds, investors won’t have to lower their risk, Samuelson says. Those who are nearing retirement can still hang onto a greater number of stocks, if they are prepared to work for a bit longer if the market declines more. And with inflation eating away at those retirement savings, those who can work for longer should keep working, especially as those prolonged working years will contribute more to retirement funds and reduce the number of years those funds need to last after you retire. As for those investors who are still at least a decade away from retirement, Samuelson says, “stay the course.” And advisors should be guiding clients to resist the temptation to pull all their money out of the market, especially during the years when their clients have the most money to invest.

Many advisors might be looking at tax harvesting this year in particular, and while Samuelson acknowledged that it can be a useful tool in the short-term, by limiting tax exposure, it’s not as effective as other tax-smart strategies. Samuelson also called out younger investors, reiterating that “investing in a diversified portfolio is the key to long-term success,” rather than trying to pick stocks they think are good and risking any savings they may want to use down the line to buy a house or retire. Those investors also have a greater tendency to obsessively check their investment apps, and that makes them more likely to make rash decisions.

Investors have more options today to gain exposure to the overall market—such as ETFs—than they did back when Bogle created the mutual fund index. Because of all those options, working with a financial advisor, who can create a financial plan specifically tailored to a client’s needs and goals, may be an invaluable approach, especially in the uncertainty and volatility of today’s markets.


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