Skip to comments.Vanguard Founder Jack Bogle's Market Forecast
Posted on 10/21/2018 9:47:03 AM PDT by NRx
A short interview with Jack Bogle (the father of the low cost index fund) who gives his thoughts on where markets may be going. Appx 6 minute.
(Excerpt) Read more at youtu.be ...
* Costs matter. Fees expenses and taxes are lost not just in a given year but their productivity is also missing every year thereafter for the rest of your investing life. This is called the tyranny of negative compound interest and it kills long term returns.
* Because of management costs and trading fees coupled with the inevitability of human error it is extremely difficult for private investors and/or active fund/portfolio managers to beat the index. Over the long term it is all but impossible due to the tyranny of negative compound interest.
* Low cost index funds are almost always the best investment vehicle as they minimize fees and expenses while tracking the broader indices.
* The future is unpredictable. Stay diversified. Unless you are financially independent to the point where you can ignore a drastic market move, most investors should not have more than half of their money in stocks.
* Ignore market volatility. If you are adequately diversified you should be able to shrug off the occasional market plunges.
* Reinvest dividends. Reinvesting dividends when using dirt cheap index funds not only is the only way to beat the market consistently, it also snowballs over time thanks to the law of compound interest.
* Don't trade and minimize speculative investing. Never speculate with money you can't afford to lose.
* Have an emergency reserve of cash equivalent to a year's anticipated essential living expenses.
* Avoid debt like the plague. Debt is the mortal enemy of financial security. Never invest using "margin."
My favorite Jack Bogle story:
Bogle was once asked to describe the best financial lesson he ever learned. His answer:
I was a runner in a brokerage firm in 1947 and an old runner with me said, Bogle, the only thing you need to know is that nobody knows nothing.
Exactly. One way to amuse oneself is to keep track of what psychics predict and then revisit their predictions a year later. It's even more amusing to read a story in the financial press whose title is something of the form "Markets up/down today because of X", and then revisit it 24 hours later.
I like seeing 10 different ideas as to why the market is doing what it is doing a half hour after the open and then, magically, by the end of the day they all agree on the reason!
Index funds aren’t what they used to be. In the current S&P 500, a mere ten stocks represent 10% of the capitalization and most of the gains in the past 5 years. In the S&P 100, the same ten stocks represent 20% of the capitalization and nearly all the growth.
If you buy the S&P 500 now, you are essentially betting on a handful of tech stocks with very elevated valuations.
This is why I select the stocks I want to own.
My strategy, which allowed me to retire at 56:
Live WAY below your means
Earn as much $ as you can when you’re young & healthy
Stay OUT of debt (cars, credit cards, student loans, etc.)
PAID FOR Land
Stocks & Bonds (401K or IRA)
Guns & Ammo
Can Opener ;)
Excellent list. Congrats on retiring at 56!
I have spent a lot of time on auction sites (not ebay) and one thing I’ve seen is what a great investment guns are. They sell for fabulous prices. Probably appreciate better than most anything else.
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