Hello friends,
Since I am reviving this newsletter, but in a new place and new format, welcome (or welcome back) to the 1st edition of The Rational Investor Newsletter. Every business day, we share a timeless bit of wisdom from a legendary investor, followed by a little commentary to help Main Street investors become better investors!
Onto today's quote...[emphasis is mine]
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“Benjamin Graham believed that your first investment decision should be how to allocate your investment assets: How much should you hold in stocks? How much in bonds? Graham believed that this strategic decision may well be the most important of your investment lifetime.
A landmark 1986 academic study confirmed his view. The study found that asset allocation accounted for an astonishing 94 percent of the differences in total returns achieved by institutionally managed pension funds.
That 94 percent figure suggests that long-term fund investors might profit by concentrating more on the allocation of their investments between stock funds and bond funds, and less on the question of which particular funds to hold.”
Here’s the key idea: your asset allocation drives your investing outcomes.
Because, historically speaking, the more you allocate to equities, the higher your probable return. The higher your probable return, the better your odds of achieving your long-term financial goals.
That’s why this decision—how much to own in stocks versus bonds—is so foundational to whether or not you achieve your financial goals.
While many investors (and the media) obsess over finding the “best” fund, Bogle reminds us that it’s the mix, not the minutiae, that matters most.
Until next time, invest rationally.
-Ashby
P.S. If you'd prefer this in podcast form (with me riffing a bit more on this topic), you can listen to via The Rational Investor Podcast.
