Vanguard's investment tips for 2017
09 January 2017 | Topical insights
By Bill McNabb, chairman and chief executive officer, The Vanguard Group, Inc.
Valley Forge, Pennsylvania
As we begin a new year, I'm struck by the questions we've been receiving from our investors. Never before – not even during the global financial crisis – have investors come to us with such specific concerns about the movements of the markets and governments around the world.
We're living in unprecedented times, so we certainly can't predict what 2017 will bring. And if you know Vanguard, you should know not to expect hot tips or "sure bets" from us either. But I do have three suggestions to help investors reach their goals.
1. Prepare for uncertainty. Several political and economic events caught observers by surprise in 2016, including the results of the Brexit vote in the United Kingdom and the presidential election in the United States. Markets respond to surprises with volatility, and we expect more surprises in 2017. With a new US administration comes the potential for changes to policies that affect investors. Some may be beneficial; some may trigger market volatility. Generally, the best approach in any environment is to maintain a long-term perspective and a balanced and diversified portfolio.
2. Save more. In addition to potential near-term volatility, we expect the equity and bond markets to produce lower returns in the next ten years than they have over the past several decades. This will place the burden on investors to save more. Saving more is an asymmetrical proposition: If you don't save enough and the markets don't assist you, there's nothing you can do. If you over-save and do well, great – you may be able to retire a few years earlier.
3. Stay well-informed. Great investors understand how all the pieces fit together. Become familiar with all the components of your portfolio and know the role that each one plays in your investment plan. Stay abreast of the markets and economy but don't be driven by their movements. I realise it sounds paradoxical to say, "Stay current but resist the urge to act." But that's what we believe is the most sensible approach.
Thank you for entrusting your assets to Vanguard. Here's to a prosperous 2017.
F. William McNabb III
Chairman and Chief Executive Officer
The Vanguard Group, Inc.
This article is designed for use by, and is directed only at, persons resident in the UK.
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Issued by Vanguard Asset Management, Ltd, which is authorised and regulated in the UK by the Financial Conduct Authority.