It’s Still a Buy-and-Hold World for Vanguard’s Former Chairman

Jack Brennan’s new book is geared for investors but provides insight for advisors.

Jack Brennan has powerful lessons to impart in his new book, “More Straight Talk On Investing,’’ including, it’s never too late to start saving for a secure future, and even the CEO of the world’s largest provider of mutual funds can learn a thing or two after 50.

Brennan, 67, is chairman emeritus and senior advisor of Vanguard, the investment giant that manages about $7.2 trillion in global assets. He was its CEO for 12 years and succeeded Vanguard founder John C. Bogle in 1998 as chairman of the board, serving until 2009.

Yet, even from that exalted position, the first lesson Brennan shares is this: Aside from well-informed investing choices, he owes his personal financial security to “living below my means.’’ He urges readers to do likewise.

“When people ask me for my best financial advice, I have only one answer: Live below your means. You simply cannot spend every penny you earn if you hope to accumulate wealth. ‘’

Brennan’s book, updated from its original 2002 edition, is primarily intended as a tool for investors, but advisors will glean ample insights, to wit: You can bet on tumult in the market. Best to advise your clients that buy-and-hold, long haul investing protects their money and their stomachs from the churn.

“Many academic studies have shown that holding investments for the long term works far better than trying to time the market; I’m a buy-buy, buy-and-hold investor, and so are all of the successful investors I know,’’ Brennan says.

In his preface to the 2002 book, looking back at 1997 to 2002, Brennan understood why “many investors seem shaken and unsure of what to do.’’ In those five years, Brennan writes, a record bull market produced one of the largest speculative bubbles in history, followed by the bubble bursting and a prolonged bear market, the worst that the U.S. stock market had experienced since World War II.

Contemporaneously, the “swift and severe drop in the global stock markets’’ brought on by the coronavirus pandemic in early 2020 inspires Brennan to observe, “Maintaining a long-term perspective and controlling one’s emotions are valuable lessons that investors can glean from trying times.’’

But having witnessed their elders endure the gravely unsettling bear market, the financial collapse of 2008-2009, and the pandemic’s brutal effects, Brennan says millennials (born 1981 to 1996) are shying away from the market in big numbers.

Skepticism is Counter-Productive

Brennan says such skepticism is counter-productive:

“Participating in the market is a must for long-term financial security, and for this generation now in the prime of their investing years, as well as for Generations Z and Y, a primer may be helpful.

Jack Brennan
Jack Brennan

“(And) no matter what one’s age, sophistication or experience, a back-to-basics course is always helpful, particularly during trying times, when conflicting advice typically abounds,’’ he says.

New investors should begin by educating themselves about finance, then gain enough confidence to make decisions independent of the opinions of friends, family, neighbors and most financial pundits.

Brennan says there’s never been a better time to invest, because numerous investment vehicles (including his favored mutual funds and ETFs) now exist, the cost of investing has never been lower, educational material is abundant, investor protection has improved and tax advantages are available through IRAs.

In the short span since his last book, nascent ETFs and target-date funds have “become core investment tools and offer low-cost, diversified exposure to the global stock and bond markets.’’ In 2008, digital platform robo-advisors were launched.

Investors with knowledge, confidence and discipline can manage their investments during the accumulation years, but if they lack those traits or are near or in retirement, they should seek professional help, he says.

Help With Life Events

In “Some Advice on Financial Advice,’’ Brennan says investors need a pro to help them deal with life events (spousal death, retirement); to seek reassurance (get second opinions on re-balancing portfolios); to deal with complexity (college loans; college savings) and to manage retirement years.

Brennan’s range is comprehensive. He begins with the basics — have conservative expectations, create a detailed plan and use automatic investment programs (dollar-cost averaging).

He explains why balance and diversification “help to manage the risks that are inherent in investing,’’ and details the nuances of asset allocation and why mutual funds and ETFs achieve diversity.

There are chapters on keeping investing costs down by mastering how expense ratios work, how to maintain equilibrium during bear markets, and plenty of charts and graphs, including a group that supports Brennan’s beloved maxim that “time is your ally’’ because of the miracle of compounding.

But even a top-shelf mind such as Brennan’s can be prone to stumbles: He recounts the promise he made several years ago not to donate his shares in a friend’s venture to charity until they hit $50. The stock hit $49.80 in early 2020, Brennan held fast for that last $.20, and one month later, the stock plunged to $19.50 a share.

Lesson learned? “Never anchor to an artificial price or value of an investment. The market today tells you what it is worth.’’

Readers are in good hands with Brennan. In conversational, jargon-free prose, he translates his deep experience and ever-expanding knowledge into easily digestible advice. All proceeds from the sale of the book go to the Vanguard Strong Start for Kids Program™, a charity that supports early learning.

“More Straight Talk on Investing’’ by Jack Brennan with John Woerth. John Wiley & Sons. 318 pages. $25.

In a four-decade career in journalism, Eleanor O’Sullivan has reviewed many books on best practices for financial advisors, has written for Financial Advisor and the USA Today network, and was movie critic for the Asbury Park Press.

 

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