Who are the 3 good guys in investing?

We know who the best investors are. Who the most famous are. But who are the good guys in investing? Who are the ones that have helped millions of people achieve their hopes and dreams through investing? In this article, we highlight three people who have gone above and beyond in helping everyone invest better.

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The Good Guys of investing

The world of investing is littered with stories of famous investors, bankrupt investors, unlikely investors, and unique investors.

For most of us, those stories should remain stories. We cannot replicate the success of these famous investors.

The good guys in investing are those individuals that have gone above and beyond in helping everyone invest better. They have helped everyone understand investing and made it easy to implement an investing strategy.

To be sure, many that have done just that and even proclaim they are doing just that! But be wary. Because the truly good guys are hard to find. If you should only listen to a few people about investing, listen to these three people.

Why the best investors can’t help you

The best investorsare just that. The best investors. The best investors can’t help you achieve your financial goals. They are busy being the best. The best investors include:

Benjamin Graham
Warren Buffett
David Tepper
Sir John Templeton
Jesse Livermore
Peter Lynch
George Soros
Bill Ackman
Stanley Druckenmiller
Jim Chanos

These investors have all achieved phenomenal returns above the market average.

But they can’t help you.

First, because they are not out to help you, but help themselves make money. That’s their primary goal.

Second, their methods are so unique and different that they cannot easily be replicated. To be a great investor, you need to do something very different than everyone else is doing. If they didn’t, they would not achieve a markedly different result.

Why the most famous investors can’t help you

These are the media darlings that you always hear about. These include:

Jim Cramer
Carl Icahn
Ray Dalio
Robert Kiyosaki
Kenneth Fisher
Jim Rogers

These investors are present in the media. Either by their own accord or because the media loves them. Their returns are mediocre at best, and they are best when they are loud and self-promoting.

They can’t help you either.

First, because their incentives are completely at odds with yours. They are more often than not promoting themselves or their brand.

Second, they are simply not good investors for you. They don’t have a process nor a strategy that they can pass on.

Why the star managers can’t help you

If you look at Morningstar.com, you find plenty of funds that have beaten the market over the past five years and even ten years. It is explained due to the manager’s herculean effort in achieving superior returns year after year.

One of the more famous examples of a star manager is Peter Lynch, who managed the Fidelity Magellan Fund (1977-1990) and achieved stellar returns. The returns were achieved early in the fund’s existence; however, and as the fund grew over time, the performance lagged.

Star managers usually demand much higher compensation. This will and does invariably remove out any edge the manager can exert upon the fund.

Also, the star managers seem to fade over time, making them shooting star managers. There are a few reasons for this:

They take a massive amount of risk early to produce outsized returns. In effect, they gamble with their client’s money. If their bets pay off, they are hailed and paid as star managers. If they fail, the fund closes, and they start a new one. John Merriweather is the star witness in this account. He’s truly one of the worst money managers the world has ever seen. He does not learn, and I pity the clients who continue to invest with him. John Merriweather founded Long-Term Capital Management. LTCM blew up because John thought he was more clever than he was. See the book When Genius Failed, The Rise and Fall of Long-Term Capital Management. After the fund blew up, he founded another fund in 1999, which also blew up in 2008 because John again gambled with his clients’ money. In 2010 he again made another fund. John Merriweather already began his scandalous behavior back in the Solomon brothers were fined $50.000 because of trading fraud. John Merriweather truly outshines almost everyone in bad behavior on Wallstreet. Well, I guess he’s got Madoff to make him look like a saint.
They are fortunate for a long time. The coin-flipping effect in action described so many times elsewhere: Take 1000 managers and have them flip a coin.
After 1 year you have 500 managers that flipped heads
After 2 years you have 250 managers have flipped heads
after 3 years 125 managers have flipped heads
after 4 years 62 managers have flipped heads
after 5 years 32 managers have flipped heads
after 6 years 15 managers have flipped heads
after 7 years 7 managers have flipped heads
after 8 years 3 managers have flipped heads
after 9 years you might just have 1 manager left that is hailed as a star manager because he has flipped heads for 9 years in a row. Truly he is worthy of star manager status.

John Ueland

Why the best-educated investors can’t help you

There is some evidence that managers with an MBA perform slightly better than those without an MBA. More often than not, however, education gets in the way because of overconfidence bias. Doctors are some of the worst investors!

In 1999 Long-Term Capital Management (LTCM), a hedge fund, blew up due to poor investing strategies. The fund’s board of directors included Myron S. Scholes and Robert C. Merton, who shared the 1997 Nobel Memorial Prize in Economic Sciences. LTCM was bailed out in the year 2000 with a $3.6 billion injection overseen by the federal reserve.

Warren Buffett is quoted saying:

Success in investing doesn’t correlate with I.Q. once you’re above the level of 25. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.

How the good guys in investing can help you

The good guys in investing stand out because they don’t have a personal agenda, aside from their dedication to making the world invest better. They are not trying to sell you anything. They are not trying to impress you. Here are some other traits of the good guys in investing:

They have made extraordinary sacrifices to help you. Either monetary or time-wise.
They promote a set of replicable principles of investing
They promote a replicable process of investing
They have made significant contributions to the shrine of investing wisdom.
They have plenty of evidence to back up their investing strategies.
They eat their own cooking.
Their process has proven to work consistently over time.

Good guy in investing number One – John C. Bogle of Vanguard

Legend and supreme hero. No one even comes close to John Bogle when it comes to good guys in investing.

John Bogle is the founder of Vanguard and launched the first commercial index fund in 1976. The structure of the company of Vanguard is also unique as the shareholders themselves own Vanguard. It’s the first and only (still!) true mutual mutual fund. Let’s just go through that again because that is immensely mind-bending and important.

The company is owned by its funds. The company’s different funds are then owned by the shareholders. Thus, the shareholders are the true owners of Vanguard. The company has no outside investors other than its shareholders.

The biggest fund companies are owned by, well, its owners! Not their shareholders. For example:

Fidelity is private and owned by the Johnson family.
Charles Schwab Company is a publicly-traded company.
iShares is owned by BlackRock, which is a publicly-traded company.
PIMCO is owned by Allianz, which is a publicly-traded company.
Franklin Templeton Investments is a publicly-traded company.
Dimensional Fund Advisors is a privately owned company.
Nuveen is owned by TIAA, which is a non-profit organization.
JP. Morgan Chase & Co is a publicly-traded company.
T. Rowe Price is a publicly-traded company.
Capital Research and Management Company is privately owned.

These companies have one mission above all else: To serve their owners.

So what so special about what John Bogle did?

He aligned the interests of the owners with the investors

It is as simple as that. Vanguard is structured so that the owners are the investors.

This is most clear in that Vanguard continuously lowers its prices on its products – because that’s what the owners want! As John Bogle says, the cost is extremely important in investing. You don’t get what you pay for –you get what you don’tpay for.

A study by Morningstar.com established that the single most effective way to determine a fund’s future performance is to look at its cost. The lower the annual cost, the better the performance.

Other fund companies like Fidelity and DFA only lower their prices when they are absolutely forced to, and they do so kicking and screaming.

That’s a far-cry from Vanguard’s mission: to stand up for investors everywhere.

Because of Vanguard and because of John Bogle, millions of people enjoy lower-cost funds and will have far more money when they retire than if they had invested through other fund families.

How much more? Let’s do the hypothetical numbers.

Vanguard has $5.1 trillion in global assets under management as of January 31, 2018.

Vanguard funds’ average expense ratio is 0.19% compared to the industry average of 1.08%.

Vanguard fees for 2018: $5.1 trillion x 0.19% = $9,690,000,000.00

If Vanguard wasn’t around the fees would have been: $5.1 trillion x 1.08% (industry average) = $55,080,000,000.00

Difference: $45,390,000,000.00

That’s $45,3 BILLION that Vanguard in 2018 ALONE has saved investors!

John Bogle’s net worth is estimated at $80 million.

Are you ready to give John Bogle a medal?

But wait, there’s more.

John Bogle has written several books – all of them extremely recommended. All of them filled to the brim with investing wisdom, with evidence of how you should invest, with warnings of the many “helpers” in the financial industry.

John Bogle takes the fiduciary responsibility very seriously and has no respect for other fund companies and investors who do not take an interest in severing their shareholders.

John Bogle’s investment process

Select low-cost funds
Consider the added costs of advice carefully
Do not overrate past fund performance
Use past performance to determine consistency and risk
Beware of stars (as in, star mutual fund managers)
Beware of asset size
Don’t own too many funds
Buy your fund portfolio – and hold it

The economic impact of John Bogle and Vanguard is extremely underappreciated. I don’t think anyone in history has set up a system that has generated so much wealth to ordinary people as Vanguard. Well, maybe except for Adam Smith.

You can find John Bogle’s portfolio in our article John Bogle’s Portfolio.

Good guy in investing number two – William Bernstein

A former doctor, Willam Bernstein, has written several books and guides on investing. His book The Four Pillars of Investing: Lessons for Building a Winning Portfolio and his newest Rational Expectations: Asset Allocation for Investing Adults are a must-read for any investor of any age. He is the originator of the No-brainer portfolio, The Cowards Portfolio, and others.

William Bernstein’s process for investing is to diversify into many asset classes.
Have rational expectations for the stock market
Be skeptical of the finance industry

You can find all of William Bernstein’s portfolios here.

Good guy in investing number three – Richard Ferri

Richard Ferri is a former Navy fighter pilot and was the founder of portfoliosolutions.com. He no longer works at portfoliosolutions.com.

If you have spent any time on portfolioeinstein.com, then you know I’m a huge fan of Rick Ferri and his writing, which I consider some of the best material on investing you can get your hands on. He has written some great books including:

In addition to that, he promotes diversification in investing and simplifying your investment.

He is active on the Bogleheads forum and is very generous with his time commenting on posts and answering questions.

You can find all of Rick Ferri’s portfolioshere.

Good guys in investing runners-up

These are the runners-up. They have all done plenty to serve the investing community, and all have a good process for investing.

David F. Swensen. He is the author of David Swensen – Unconventional Success: A Fundamental Approach to Personal Investment. Find his portfolio here

David Swensen - Unconventional Success: A Fundamental Approach to Personal Investment

Paul Merriman, author of Get Smart or Get Screwed: How To Select The Best and Get The Most From Your Financial Advisor. Find all of Paul Merriman’s portfolios here.
Charles Ellis, author of Winning the Loser’s Game, Seventh Edition: Timeless Strategies for Successful Investing.
Taylor Larimore, author of The Bogleheads’ Guide to the Three-Fund Portfolio: How a Simple Portfolio of Three Total Market Index Funds Outperforms Most Investors with Less Risk. You can find our research into the three-fund-portfolio here.
JL Collins, author of The Simple Path to Wealth: Your roadmap to financialindependence and a rich, free life. JL Collins’ portfolio is described here
Larry Swedroe, the author of many books, among the best, are Wise Investing Made Simple: Larry Swedroe’s Tales to Enrich Your Future. We described Larry Swedroe’s many portfolios here.

Suggestions for your next steps

If you have already committed to a portfolio then maybe you need help maintaining the portfolio. In this case you will find our rebalance worksheet useful.

Rebalancing your portfolio lowers your risk and may provide higher returns in the long run. It is completely FREE.

You can find the rebalance worksheet in our article Here Is The Most Easy To Use Portfolio Rebalance Tool.

Summary and your next steps

Navigating the world of investing is tough. Who to believe? What to invest in? If you start with the good guys in investing, you’re off to an excellent beginning – and end!

You simply cannot go wrong if you read any of their books or listen to them talk. They are honorable, look out for the individual investor, and have a process for getting you up and running.

Who Are The 3 Good Guys In Investing?