Comment by Greg Davis, Chief Investment Officer at Vanguard
At Vanguard, we have always emphasized the value of low-cost, long-term, diversified investment philosophy. I have recently watched with concern the unexpected rise in the value of a handful of stocks, although there has been no significant change in their fundamentals – a general measure of a company’s health and future value.
There is a distinct difference between investment and speculation. Investors have long taken the assumption that a company’s share price will rise based on fundamental improvements such as earnings and cash flow. With the kind of speculation we’ve seen over the last few days, buyers are betting that someone will buy from them at a higher price. This is called the Greater Full Theory.
Markets have historically rewarded historians who take a long-term view. One of the key features of Vanguard’s principles for investment success is setting clear investment goals, diversifying portfolios well across asset classes and regions, and keeping investment costs low.
Speculation has destroyed much more destiny than that. Shares that have risen so spectacularly will find their balance. Over time, they are usually – and sometimes painful – correct. It’s not a way to invest your leisure savings, or the money set aside for your home or child’s education.
Stop the noise and stay tuned – a double-tested vanguard investment philosophy that continues to serve investors well.
All investments are at risk, including the potential loss of money you invest.
Past performance is not a guarantee of future results.
“When stocks go beyond originality”,