John Bogle Shares Thoughts on Professional and Business Values—Part 5

An essay by Vanguard founder John Bogle, published in a recent issue of the CFA Institute’s Financial Analysts Journal, offers insights and guidance concerning the need for balance between professional values and business values in the world of investing and finance. This is the last installment of our series outlining highlights of the essay. Bogle outlines some of the advice he has offered his clients over the years: Invest you must. Bogle says that the failure to earn a sufficient return is a bigger risk than short-term volatility in the market. Time is your friend. Start investing as early as […]

Jack Bogle Shares Thoughts on Professional and Business Values—Part 4

An essay by Vanguard founder Jack Bogle, published in a recent issue of the CFA Institute’s Financial Analysts Journal, offers insights and guidance concerning the need for balance between professional values and business values in the world of investing and finance. This is the fourth installment of a five-part series outlining highlights of the essay. Bogle outlines “characteristics and attitudes” that he has championed and nurtured over his 65-year career to maintain balance between his business and professional approach to investing: Develop competence: Bogle highlights the importance of education as well as the need to be “an aware citizen of […]

John Bogle Shares Thoughts on Professional and Business Values—Part 3

An essay by Vanguard founder John Bogle, published in a recent issue of the CFA Institute’s Financial Analysts Journal, offers insights and guidance concerning the need for balance between professional values and business values in the world of investing and finance. This is the third installment of a five-part series outlining highlights of the essay. Bogle uses the examples of Adam Smith and Benjamin Graham, trailblazers in professional investing, to illustrate the evolution of the industry: Smith, whose book Theory of Moral Sentiments in 1759, highlights the importance of prudence in business dealings: “The care of…the fortune…is considered as the […]

Bogle’s Rules of Success for the Everyday Investor, Plus Four Stocks that Make the Grade

In a recent article for Forbes, Validea CEO John Reese recounts some rules for investment outlined by Vanguard’s Jack Bogle in his 2012 book The Clash of the Cultures: Investment vs. Speculation, and how they apply to the everyday investor: Remember Reversion to the Mean: The theory in finance that, over time, a stock’s price will tend to move back to its average. “The trouble comes,” says Reese, “when investors try to predict when such a reversion will take place by timing the market.” Time is Your Friend, Impulse is Your Enemy: Reese cites the philosophy of Warren Buffett that […]

John Bogle Shares Thoughts on Professional and Business Values—Part 2

An essay by Vanguard founder John Bogle, published in a recent issue of the CFA Institute’s Financial Analysts Journal, offers insights and guidance concerning the need for balance between professional values and business values in the world of investing and finance. This is the second installment of a five-part series outlining highlights of the essay. These are some of the pressures that Bogle argues impedes the balance between profession and business: New technologies: The lower costs associated with today’s computer-driven securities trading as well as robo-advisor products “which use technology to make inroads into traditional methods of providing advice to […]

John Bogle on the Balance Between Professional and Business Values in Investing—Part 1

An essay by Vanguard founder John Bogle, published in a recent issue of the CFA Institute’s Financial Analysts Journal, offers insights and guidance concerning the need for balance between professional values and business values in the world of investing and finance. This is the first installment of a five-part series providing highlights of the essay. Bogle cites a 2005 article in which Harvard professor Howard Gardner and Carnegie Foundation president Lee Shulman argue: “The primary feature of any profession [is] an inherently ethical relationship between the professional and the general society.” He then applies this notion to the finance industry, […]

John Bogle on Common Investor Mistakes

In a 2014 interview with AAII Journal, Vanguard founder John Bogle outlined common investor mistakes and other thoughts about the market. Here are some highlights: “The biggest mistake investors make is looking backward at performance and thinking it’ll recur in the future,” says Bogle, citing the importance of reversion to the mean. “The winners in decade one tend to be the losers in decade two,” he says, and vice versa. Considering returns in “nominal dollars.” Investors, he says, should account for inflation and fund expenses when evaluating investment income. “Indexing works,” he says, “because the math is correct, and that’s […]

Jack Bogle on Indexing: “Math is Math”

Back in 1976 when John “Jack” Bogle started the first index fund, his goal was to “capture the overall market’s return at much lower costs than the stock picking fund managers who so often failed to match it,” writes Bloomberg’s Michael Regan in a recent interview with the octogenarian and retired head of Vanguard. The lengthy conversation covers a wealth of topics including these highlights regarding index investing: While Bogle acknowledges that there are plenty of naysayers of index investing, he defends the strategy by stressing that there is an “underlying, fundamental trend” toward indexing that is “not one built on […]

Zweig on the Impact of Index Funds

Last month marked the fortieth birthday of the first index fund (launched by John Bogle, founder of the Vanguard Group) and the anniversary has triggered a lot of discussion and reflection on the trajectory this class of funds has traveled since. Jason Zweig of the Wall Street Journal shares some thoughts on the subject and how the phrase “too much of a good thing” could apply. Zweig reports that over the past year $409 billion has flowed into index funds, a class of funds that “slash the costs of investing by 90% or more by skipping most of the research […]

Jack Bogle on the Future of Index Investing

When Jack Bogle created the first index mutual fund for individual investors (Vanguard 500) forty years ago, he probably didn’t imagine that it would grow to 20 million investor-clients and more than $3 trillion. In last week’s Wall Street Journal, columnist Holman Jenkins, Jr. shares some of Bogle’s insights and opinions as he marks his 65th year as an industry leader. The 87 year-old visionary sees the appeal of index funds only magnifying given “the decade of depressed returns he sees ahead,” writes Jenkins. According to Bank of America, he adds, $600 billion in investor cash has exited actively managed […]

Bogle: No Stock Pickers in What Looks Like an Expensive Market

Jack Bogle, founder of the Vanguard Group, tells CNBC that “there is no such thing as a stock picker’s market.” He goes on to say that the phrase, “a stock picker’s market is meaningless” but catches on and gets investors’ attention. Bogle, who is best known for popularizing passive, low-fee index investing, goes on to say that the stock market returns will likely be lower over the next ten years vs. what they have been in the past. Bogle says that with the market’s P/E of 22 and dividend yield of 2%, investors can expect to get a decade of […]

Jack Bogle’s Advice for the Individual Investor

The AAII Journal published an interview with Vanguard founder John “Jack” Bogle, to whom AAII gave its Cloonan Award for Excellence in Investment Education in 2015. The interview focuses on advice for the individual investor. Bogle said, “by far the best way to own equities is to own them through either a Standard & Poor’s 500 index fund or a total U.S. stock market index fund” and that an investor should “hold it forever.” He also emphasized that investors should minimize costs, describing investing as “a zero sum game,” except that “it’s not a zero sum game” once fees are […]

Bogle’s Straightforward Formula for Estimating Future Stock Price Returns

The Wall Street Journal’s Money Beat column highlights the value of simplicity in investment prediction models. Profiling work by John C. Bogle, founder of Vanguard Group, that draws on historical data, the piece highlights his three-factor formula for determining the “sources of return.” These are: Starting yield (annual dividends divided by stock price) Earnings growth Speculative return (changes in pricing by investors) The first two factors can be grouped together, according to Bogle, as “investment return” because they reflect what companies actually generate rather than speculation on pricing by the market. “If you don’t like my numbers,” Bogle says, “you […]

John Bogle Suggests Low Returns Likely Over the Next Decade

John Bogle, founder of Vanguard Group, has a pessimistic prediction for markets over the next decade. He says that he divides his expected return forecast into two segments: investment return and speculative return. For the first, he combines 2% dividend yield with estimated earnings growth of 6% to reach a total of 8%. However, his speculative return number then incorporates predictions about the price-to-earnings ratio, which he expects to fall from an estimated 20 times underlying value to about 15 times, yielding a speculative return of about 4%. For bonds, Bogle suggests that investors may be able to realize about […]

John Bogle Suggest Low Returns Likely Over the Next Decade

John Bogle, founder of Vanguard Group, has a pessimistic prediction for markets over the next decade. He says that he divides his expected return forecast into two segments: investment return and speculative return. For the first, he combines 2% dividend yield with estimated earnings growth of 6% to reach a total of 8%. However, his speculative return number then incorporates predictions about the price-to-earnings ratio, which he expects to fall from an estimated 20 times underlying value to about 15 times, yielding a speculative return of about 4%. For bonds, Bogle suggests that investors may be able to realize about […]