Bogle keeps it simple
NEW YORK – John Bogle, founder of the nation’s second largest mutual fund company, dismisses many of the products hawked these days by financial companies as largely self-serving. His advice for investors seems to square with one popular marketing pitch: Set it and forget it.
The phrase serves as a delightfully short to-do list for those who don’t want to juggle many investment decisions. And the idea of making an investment decision and sticking with it has helped the retired chief executive of The Vanguard Group and creator of the index mutual fund accumulate a healthy savings account of his own and to look past many of Wall Street’s gyrations.
Bogle said investors too often chase returns rather than adopt a long-term investment strategy that prizes broad diversity and low fees.
His actions, or lack of them, reveal his devotion to long-term investing – for example, how much of his portfolio has been in bonds. In the mid-1990s, Bogle said, he had about 20 percent of his holdings in bonds. While he said he was probably invested too conservatively for much of his career he later shifted more into fixed-income after a heart transplant. Then, during the run of the dot-com boom a decade ago, he moved even more heavily into bonds and hasn’t changed lanes since, unlike many investors who are continually buying, selling and adjusting.
“In 1999, when the market was just idiotic – it just made no sense – I went to about 65 percent bonds and 35 percent stocks,” he said. “I haven’t made a single change in my asset allocation since 1999.”
Bogle said many investors have little reason to look beyond a simple investment plan – despite the litany of advice, pitches and come-ons that people receive. He sees many of the funds that promise to carry investors to every corner of the investable universe as unnecessary.
But some newer products have merit, he contends. By keeping investors out of the cockpit and away from the controls, investments like target-date funds can help those saving for retirement or other far-off goals from fiddling with their holdings. The funds offer a different route to saving than Bogle has taken but, if done right, they can help investors sidestep many distractions and avoid being driven by emotion.
Bogle said he has proved that simplicity in investing can be a powerful weapon. He contended – as he has throughout his career – that staying away from actively managed funds, as opposed to index funds, helps hold down costs, leaving more in investors’ pockets.
“The focus is always on simplicity,” he said of his approach to investing and to the operations at Vanguard, which he no longer oversees. “I don’t like managers to do very much. In an index fund you do essentially nothing.”
“We know that rare indeed is the mutual fund whose shareholders earn as much as the fund earns itself,” he said.