📖John Bogle
Price vs Value Disconnect
Prices diverge from value short-term but converge long-term.
In the short run, the market is a voting machine; in the long run, it's a weighing machine. Prices can diverge wildly from value, but eventually converge.
🏠 Everyday Analogy
📖 Core Interpretation
In Price vs Value Disconnect, John Bogle focuses on the gap between price and value. Returns come from paying less than what a business is worth, not from guessing short-term market moves.
💎 Key Insight：The voting-to-weighing machine transition is inevitable.
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❓ Why It Matters
Ignoring valuation turns even good companies into poor investments. Overpaying compresses future returns and leaves little margin when assumptions are wrong.
🎯 How to Practice
Estimate intrinsic value with conservative assumptions, set clear buy ranges, and act only when price offers a meaningful discount with acceptable downside.
⚠️ Common Pitfalls
Confusing a low price with true cheapness
Using one metric without business context
Overly optimistic assumptions that erase margin of safety
📚 Case Studies
1
Pension Funds: High-Fee Hedge Funds vs. Low-Cost Indexing (2008)
In the 2000s, many public pensions and institutions shifted billions into hedge funds and “alternative” strategies with 2% management fees plus 20% of profits, while others stayed largely in low-cost index funds after the 2008 crisis.
✨ Outcome：Studies (e.g., by the Center for Economic and Policy Research and various state reviews) later showed that, net of fees, hedge fund-heavy pensions often lagged simple indexed portfolios. The high-fee structures siphoned off returns, vividly demonstrating that excessive costs can overwhelm any skill advantage.
2
John Bogle Launches Vanguard Amid a Brutal Bear Market (1974)
In 1974–1975, during one of the worst post‑war bear markets, John Bogle founded Vanguard and prepared the first index fund. Stocks had fallen ~45% from the 1973 peak. Many investors fled equities and shifted to cash and “hot” active managers, doubting the wisdom of broad, low‑cost indexing.
✨ Outcome：Those who stayed invested in diversified U.S. stocks saw strong returns through the late 1970s and 1980s. The S&P 500 compounded dramatically, validating Bogle’s view that disciplined, long‑term ownership of the market beats short‑term trading and panic selling.
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