I have enjoyed Dilbert comics since they first started showing up in my Sunday paper in the early 1990s. I found creator Scott Adams’ brilliant insights into business culture hilarious but I didn’t know anything about Adams himself other than that he could make me laugh. Unknown to me Adams was also an investing expert.
Of course, he wouldn’t admit to this. In fact, Adams once stated, “I’m not an expert on anything, including my own job. I draw like an inebriated howler monkey and my writing style falls somewhere between baffling and sophomoric. It’s an ongoing mystery to me why I keep getting paid.”
So what makes Adams an investing expert? Several years ago I was reading a book by one of my heroes, Vanguard founder John Bogle, and there in Bogle’s book, much to my surprise, was a lengthy quote from Scott Adams.
Praise from Bogle instantly elevated Adams to an expert in my eyes. You see, Bogle has done more for the small individual investor than anyone in history. In the 1970s Bogle pioneered index mutual funds, and then he started mercilessly cutting management fees on Vanguard’s mutual funds eventually forcing other companies to follow suit to compete.
Speaking of index mutual funds Nobel Prize-winning economist Paul Samuelson stated, “I rank this Bogle invention along with the invention of the wheel, alphabet, Gutenberg printing, and wine and cheese; a mutual fund that never made Bogle rich but elevated the long-term rewards of mutual fund owners.”
And what did Adams write that Bogle found so compelling? Adams has an undergraduate degree in economics and an MBA, and has studied investing for years. He is also a long-time investor and has learned a lot from his own mistakes. At one point he made the decision to write an investment book geared towards beginning investors. As Adams started researching he quickly realized that it was going to be very a short book. In fact, he finally decided he could fit everything a beginning investor needed to know on one page.
Bogle, who has spent his life trying to make investing simple, read Adams’ concise advice and liked it so much he included it in his own book. Suddenly the esteem in which I held my favorite cartoonist rose dramatically. It turned out Adams could do more than make me laugh. He could also teach me important lessons about investing.
Fritz, at The Retirement Manifesto, has created an infographic of Adams’ one-page investing advice for you to print out and hang on your wall. It is a great reminder of how simple personal finance should be.
I am not sure why it tickled me so much that an investing legend would quote a cartoonist in a serious financial book, but it did. I guess Adams and Bogle just struck me as an unlikely pair. However, the more I read Dilbert comics and Bogle’s writings the more I realized they aren’t an unlikely pair at all, but a perfect match. They have similar investing philosophies and they each use their considerable influence and unique talents to teach the same investing principles, which is a wonderful thing because we all learn in different ways. Once I realized this it was clear that I needed to pair Dilbert comics with Bogle’s always memorable quotes.
Of course, there is the question of credibility. Bogle has a great reputation and has always been willing to speak the truth, even when it was unpopular. Adams, on the other hand, once wrote “I’m not too proud to admit that given a choice between saying what’s true and saying what’s funny, I’ll take the path with the greatest entertainment value.” Fortunately for us these comics are both funny and teach investing truths, as the accompanying Bogle quotes affirm. So without further delay, here are 10 investing lessons from Scott Adams and John Bogle:
The Surest Route to Wealth
“Buy-and-hold, long-term, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth.”
All The Risk and 30% of the Reward
“Active management is going to cost you around 2% all-in for the average fund….So that means that in a 7% market you’ll get 5%. [An index fund that costs 0.05% means that you get 6.95%]. At 6.95% you turn $1 into about $30 over 50 years. But at 5%, you get $10 instead of $30. And what does that mean? It means you put up 100% of the cash, you took 100% of the risk, and you get 30% of the reward. That’s what happens when you look at returns over the long term.”
“In the investment field, time doesn’t heal all wounds. It makes them worse. Where returns are concerned time is your friend. But where costs are concerned, time is your enemy.”
You Get What You Don’t Pay For
“An investor with minimal curiosity will learn that the shortest and surest route to top-quartile performance is bottom-quartile expenses.”
“In the mutual fund business in the aggregate, you don’t get what you pay for. You get precisely what you don’t pay for.”
“Mountains of data strongly affirm that the cost of investing goes hand in hand with asset allocation as the key determinant of long-term returns. The bottom line: Costs Matter.”
“Fund returns are devastated by costs….The miracle of compounding returns is overwhelmed by the tyranny of compounding costs.”
Buy The Haystack
“The simple fact is that selecting a mutual fund that will outpace the stock market over the long term is, using Cervantes’ wonderful observation, like ‘looking for a needle in a haystack.’ So I offer you Bogle’s corollary: ‘Don’t look for the needle in the haystack. Just buy the haystack!‘”
Simplicity Is The Master Key To Financial Success
“The great paradox of this remarkable age is that the more complex the world around us becomes, the more simplicity we must seek in order to realize our financial goals. Never underrate either the majesty of simplicity or its proven effectiveness as a long-term strategy for productive investing. Simplicity, indeed, is the master key to financial success.”
Where Are All The Customer’s Yachts?
“Rounding up only the usual suspects – who are by no means the only intermediaries in the system – we quickly come up with $400 billion of intermediation costs, more than $1 trillion dollars out of investor’s pockets every three years! Playing off the inspired title of a book published a half-century ago – Where are the Customer’s Yachts? – we now know why so few of those yachts in the harbor are owned by the customers who play in the stock market casino; they’re mostly owned by those who operate the casino. What else is new?”
The Stock Market Is a Distraction From Investing
“The expectations market is about speculation. The real market is about investing. The stock market, then, is a giant distraction to the business of investing.”
The Virtues Necessary For Successful Investing
“What, then, is the optimal method of…accumulating a substantial investment account? Rely on the ordinary virtues that intelligent, balanced human beings have relied on for centuries: common sense, thrift, realistic expectations, patience, and perseverance. In investing, I assure you that those characteristics will, over the long run, be rewarded.”
Retire On Your Terms
“I would argue that the shift from DB [Defined Benefit or pension] plans to DC [Defined Contribution or 401(k)] plans is not only an inevitable move, but a move in the right direction in providing worker retirement security. In this era of global competition, U.S. corporations must compete with non-U.S. corporations with far lower labor costs. So this massive transfer of the two great risks of retirement savings – investment risk and longevity risk – from corporate balance sheets to individual households will relieve pressure on corporate earnings, even as it will require our families to take responsibility for their own retirement savings. A further benefit is that investments in properly designed DC plans can be tailored to the specific individual requirements of each family…”
I hope you had as much fun reading this as I had putting it together. And if you learned something along the way that makes you a better investor, that’s great too. Now get out there and rewrite your financial story!