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Barry Ritholtz

Vanguard's Brennan Knows What Isn't Important

The firm’s chairman emeritus says human emotions account for too many investing errors.

Almost all investing errors and mistakes come down to human emotions. So says John “Jack” Brennan, chairman emeritus and former chief executive officer at Vanguard Group Inc., which manages more than $6 trillion. Brennan, who was John Bogle’s hand-picked successor, is this week’s guest on the Masters in Business podcast.

Brennan explains why the notion of “how markets traded today” is not as important to investors as it seems. But if markets become so volatile that they cause you to lose sleep, you have a problem to manage. You can do that by either lowering your risk levels or accepting that volatility and drawdowns are part of investing. Either process leads you toward the goal of being a successful long-term investor. By not panicking in late 2008, Vanguard calculated its investors saved about a $1 trillion in trading losses. Brennan also discusses why “alpha” matters far less than meeting your personal goals and objectives, and managing money with purpose toward your own financial plan. The current attacks on passive investing date back to the late 1960s and when Vanguard began in 1974. He notes that critics have been proven wrong by time.