Marketwatch's Chuck Jaffe recently conducted an interview with the greatest friend the individual investor has ever had: John Bogle.
Bogle banged the drum for the cause he has made famous: Active investing generally leads to poor returns, and the best thing an investor can do is buy index funds and rely on the long-term returns generated by businesses to create long-term portfolio success.
Jaffe asked Bogle for his reaction to the numerous market gurus who have suggested that the future returns of the market will be lower than in the past. Bogle explained that lower dividend yields and slower earnings growth will lead to an average annual return of around 7%, more than 2% less than the historical yield of the market. What should investors do about that? They just have to save more money, according to Mr. Bogle.
Bogle remains a big supporter of traditional index funds, and isn't too impressed with ETFs or hybrid funds. As he said in a recent column, "Mama, what have they done to my song?"
All of his books are terrific, but an absolute must-read is his tome on corporate governance, The Battle For the Soul of Capitalism.
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Reader Comments (Page 1 of 1)
9-04-2007 @ 10:06AM
Michael Schneider said...
It is true that not everyone can beat the market averages but if everybody buys index funds that becomes a self-fulfilling prophecy-- index funds and the stocks in the index funds rise because everybody is buying them. For a time it would be more difficult to beat the index funds but eventually investors could find more bargains elsewhere because the index funds stocks would be overvalued relative to the market. John Bogle's advice to buy index funds is probably good for many investors most of the time but there are often times when certain stocks or sectors will do better than the averages. Investors might do better by studying the great investors who almost always beat the indexes-- Warren Buffett, Jim Rogers and others. Many good items on great investors are available in the Billionaire Watch section and the Channeling Jim Rogers section (both yellow labels near top) at http://www.Barrelomoney.com.