QUESTIONS FOR Q&A WITH JACK BOGLE

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QUESTIONS FOR Q&A WITH JACK BOGLE

Post by Mel Lindauer » Tue May 28, 2013 7:16 pm

Hello Everyone:

Once again I'll have the distinct pleasure of moderating a Question and Answer session with our friend and mentor, Jack Bogle. The Q&A will take place at our annual get-together with Jack at the 2013 Bogleheads Conference in Philadelphia on October 16-18, 2013.

Many of you won't be able to attend to ask your question in person, but you can post your question(s) for Jack right here on this thread.

Even if you are registered and plan to attend, you should still post your question(s) for Jack here.

Shortly before the Bogleheads Conference, I'll consolidate all the accumulated questions by subject matter, and then ask Jack to respond to as many of your questions as time allows.

Fire away!

Best regards to all,

Mel
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Re: Q&A WITH JACK BOGLE at 2013 Bogleheads Coference

Post by VictoriaF » Wed May 29, 2013 9:07 am

Jack,

What is your opinion about the new Vanguard Emerging Markets Government Bond Index Fund? How does it fit in one's portfolio?

Thank you,

Victoria
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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by Howard Donnelly » Wed May 29, 2013 10:39 am

Hi Mel,

Thank you for the opportunity to post our questions. By October, my questions may be irrelevant, but here is what I would like to ask Mr. Bogle:

Recently Warren Buffett said, "Bonds are a 'terrible investment' right now." Here is a short clip of his comments about bonds:
http://video.cnbc.com/gallery/?video=3000166510&play=1

May I ask for your thoughts about what he said?

In addition, as a result of her recent interviews with Lee Cooperman, Warren Buffett, and others, Becky Quick (Squawk Box/CNBC) sold most of her bond funds and put the money into equity funds.

CNBC's Becky Quick Dumps Bond Funds
http://www.youtube.com/watch?v=I1PWBsUZvUE

May I also ask for your thoughts about what she said?

Thank you,
Howard

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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by Iorek » Wed May 29, 2013 10:47 am

Why does Vanguard seem worse (less engaged) on corporate governance issues than other money managers, such as Black Rock, and what can shareholders, as the owners, do to encourage management to be more engaged?

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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by kappelmanm » Wed May 29, 2013 11:12 am

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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by Grt2bOutdoors » Thu May 30, 2013 2:52 pm

My question: Target type retirement funds have been marketed with rather good success to mass market retirement participants. Do you have an opinion of investment management sponsors tinkering with fund composition by amending prospectuses over time to incorporate current thinking/beliefs that adding newly developed investment strategies provides a better outcome than currently exists? The additions that come to mind are the inclusion of international bonds, commodities, private equity type investments which bear higher investment expenses.
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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by Anonymous Coward » Thu May 30, 2013 3:18 pm

Along the lines of the questions asked by Victoria and Howard, above, I'm also curious about the situation with bond funds. I have a fair amount of VBTLX and BND in various accounts, and I'm reading stuff like this:

http://www.forbes.com/sites/investor/20 ... -has-legs/

("Currently a one-percentage-point rise in yield for a 30-year bond will reduce its price by 17%. A three-point increase in yield will knock its price down 41%.")

and this:

http://www.pionline.com/article/2013053 ... -few-years

("U.S. investors will pull an estimated $1 trillion — or 13.5% of U.S. assets professionally managed in fixed income — out of core, core-plus, government and fixed-income index funds over the next three to five years because of fears over rising interest rates, according to Casey, Quirk & Associates.")

and I have to admit I'm wondering if there is any compelling logic/experience/rationale for staying the course (with VBTLX and BND) or pursuing other bond investments like VGAVX, in spite of it's 0.75% purchase fee (which Vanguard says will be charged for the foreseeable future). If so, what might that compelling logic/experience/rationale be?

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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by Peter Foley » Thu May 30, 2013 3:28 pm

Many people are worried about non equities because of the historic low interest rates. I have never seen Mr. Bogles quoted regarding stable value funds.

Perhaps the question could be: Are stable value funds a safe alternative to total bond funds? Or: Do you see a role for stable value funds as a diversifying component in the non equity portion of an investor's asset allocation.

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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by umfundi » Fri May 31, 2013 11:51 am

Rules of Thumb for Asset Allocation.

Do you have a rule of thumb for Asset Allocation (AA), such as age in bonds?

Should one's AA be adjusted for a pension, Social Security, or some other income stream? If so, how?

Should one rebalance (buy and sell assets) to maintain the AA? By which criteria?

============

I know what the Bogleheads general view on these issues is, but there seems to be some disagreement on what Mr. Bogle has said.

Keith
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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by noyopacific » Fri May 31, 2013 2:21 pm

Iorek wrote:Why does Vanguard seem worse (less engaged) on corporate governance issues than other money managers, such as Black Rock, and what can shareholders, as the owners, do to encourage management to be more engaged?
With regard to the principles described in: Battle For The Soul Of Capitalism, do you (Jack Bogle) believe there are any significant weaknesses in Vanguard's governance and how might we (as owners, rather than clients of Vanguard) seek to address issues in matters of governance?

1) Vanguard's proxy voting record, which is among the least supportive of all mutual funds of shareholder proposals in general and especially of efforts to restrain executive compensation.
http://www.afscme.org/news/press-room/p ... Report.pdf

2) Vanguards management structure 'seems to virtually eliminate any opportunity for shareholders to nominate directors or have any meaningful influence over policy. Directors are nominated from within and I am not aware of any effective means for shareholders to communicate with our Directors.

3) Executive and director compensation appears to be a closely-guarded secret and neither are required to disclose whether they own any shares in the funds they oversee.

I cannot imagine another fund company so vulnerable to being exploited by a corrupt CEO with a well-insulated and compliant Board of Directors.

Follow-up question: How might The Boglehead's get one of our own nominated to Vanguard's Board of Directors?
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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by umfundi » Fri May 31, 2013 3:10 pm

noyopacific wrote:
Iorek wrote:Why does Vanguard seem worse (less engaged) on corporate governance issues than other money managers, such as Black Rock, and what can shareholders, as the owners, do to encourage management to be more engaged?
With regard to the principles described in: Battle For The Soul Of Capitalism, do you (Jack Bogle) believe there are any significant weaknesses in Vanguard's governance and how might we (as owners, rather than clients of Vanguard) seek to address issues in matters of governance?

1) Vanguard's proxy voting record, which is among the least supportive of all mutual funds of shareholder proposals in general and especially of efforts to restrain executive compensation.
http://www.afscme.org/news/press-room/p ... Report.pdf

2) Vanguards management structure 'seems to virtually eliminate any opportunity for shareholders to nominate directors or have any meaningful influence over policy. Directors are nominated from within and I am not aware of any effective means for shareholders to communicate with our Directors.

3) Executive and director compensation appears to be a closely-guarded secret and neither are required to disclose whether they own any shares in the funds they oversee.

I cannot imagine another fund company so vulnerable to being exploited by a corrupt CEO with a well-insulated and compliant Board of Directors.

Follow-up question: How might The Boglehead's get one of our own nominated to Vanguard's Board of Directors?
In my opinion, these questions on current Vanguard practices are more appropriate for Vanguard than for Jack Bogle.

Keith
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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by Iorek » Fri May 31, 2013 4:09 pm

umfundi wrote:
noyopacific wrote:
Iorek wrote:Why does Vanguard seem worse (less engaged) on corporate governance issues than other money managers, such as Black Rock, and what can shareholders, as the owners, do to encourage management to be more engaged?
With regard to the principles described in: Battle For The Soul Of Capitalism, do you (Jack Bogle) believe there are any significant weaknesses in Vanguard's governance and how might we (as owners, rather than clients of Vanguard) seek to address issues in matters of governance?

1) Vanguard's proxy voting record, which is among the least supportive of all mutual funds of shareholder proposals in general and especially of efforts to restrain executive compensation.
http://www.afscme.org/news/press-room/p ... Report.pdf

2) Vanguards management structure 'seems to virtually eliminate any opportunity for shareholders to nominate directors or have any meaningful influence over policy. Directors are nominated from within and I am not aware of any effective means for shareholders to communicate with our Directors.

3) Executive and director compensation appears to be a closely-guarded secret and neither are required to disclose whether they own any shares in the funds they oversee.

I cannot imagine another fund company so vulnerable to being exploited by a corrupt CEO with a well-insulated and compliant Board of Directors.

Follow-up question: How might The Boglehead's get one of our own nominated to Vanguard's Board of Directors?
In my opinion, these questions on current Vanguard practices are more appropriate for Vanguard than for Jack Bogle.

Keith

Personally I am more interested in Jack Bogle's views on the mutual fund industry, and how to make sure it best serves the interests of individual investors, than in his views on specific asset allocations or investment questions. I think his contributions to mutual fund governance issues have been tremendous, and I'd be very interested to hear further thoughts of his on that topic.

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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by mcse37 » Fri Jun 07, 2013 1:27 pm

Is peer-to-peer lending (Lending Club) a good investment?

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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by EternalOptimist » Fri Jun 07, 2013 1:37 pm

What has been your most pleasant surprise with regards to your current stage of life that you would have never guessed 30 or 40 years ago?
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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by michaelsieg » Thu Jun 20, 2013 11:59 pm

I had a question if VG has ever thought about introducing Funds with a 0% ER for IRA/Roth account holders and have them pay the fund fees upfront for the year with taxable money.
If I assume an average ER of 0.4 for a well diversified global portfolio, if I could have a portfolio where I pay for the fund expenses with taxable money, the portfolio with 0% ER will grow about 10% more (tax free) in 30 years (assuming 5% annual growth versus 5.4% annual growth), or 5% more if my ER was 0.2 to begin with, which could make a difference for some investors, who have limited tax sheltered space (i.e. high income individuals with limited Roth space).

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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by stemikger » Fri Jun 21, 2013 2:22 am

Hi Jack,

In Common Sense on Mutual Funds (which is my favorite investing book) you say the best and simplest way for a person to invest is simply invest in a balanced fund (i.e. The Vanguard Balanced Index Fund).

Now with all the talk about bonds not being the safety net they once were, is this an idea I should abandon?

I recently read that you said that one should count their social security as a portion of their bond asset allocation and I also recently read that Warren Buffett has advised that the average guy or girl should not invest in bonds right now.

I’m 49 years old with a paid off home, no debt and have been at my job for 20 years. Should I lessen my bond allocation? I also feel the same way as you and prefer the pristine all U.S. market approach, so I do not feel I need international for all of the reasons you wrote about in Common Sense on Mutual Funds.

Not sure if this makes a difference, but I have retirement assets that total to $380,000.


Thank you Mr. Bogle for helping out all us little guys.
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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by wastenot » Fri Jun 21, 2013 8:37 am

Dear Mr. Bogle:

Considering the massive unfunded liabilities being accumulated by federal, state and city governments, do you believe it is necessary for governments to undertake significant reductions in spending?

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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by nisiprius » Fri Jun 21, 2013 9:00 am

Thinking back to the mid-1970s tell us what you can about what was "in the air" about index funds, and where you got the idea of actually going ahead and really creating one. I know you take exception to the idea that the Samsonite Luggage Fund at Wells Fargo "counts," and I understand the rivalry, but--David G. Booth, Rex Sinquefield... Burton Malkiel writing in 1973 that the NYSE should create an index fund and was considering it, and so forth... did you know these guys, who were you talking to, who were you talking about? As far as I'm concerned you're the Edison and I don't if there care if there was a Swan*, but I'm curious to hear what it was like back then, what was the buzz. Were index funds an idea that the active fund people knew would happen sooner or later and dreaded?

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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by nisiprius » Fri Jun 21, 2013 9:10 am

In 2010, Burton Malkiel and Charles D. Ellis published a book for beginners, The Elements of Investing, advocating a simple portfolio of just two funds, Vanguard Total World Stock Index and Vanguard Total Bond Market Index.

In 2013, they updated it with a chapter on "Timeless Lessons for Troubled Times," in which they suggested "Fine-tuning a bond diversification strategy" by swapping out Total Bond and replacing it with a mix of half emerging markets bonds and half dividend stocks. (They specifically named the iShares Emerging Markets USD Bond ETF, EMB, and the Vanguard Equity Income Fund, VEIRX). What do you think of that suggestion?
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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by fanofjack » Fri Jun 21, 2013 7:06 pm

I have heard some say that Social Security should be valued for the sake of asset allocation. Let's assume the income from Social Security is $25,000.00 per annum. Can this be valued at $625,000.00 x 4% = $25,000.00 per annum? If so, should I look at this Social Security valuation as a bond fund or as a balanced fund?

If my investment portfolio is $625,000.00 should it be in a balanced portoflio or in 100% stocks...considering the valuation of my Social Security account? I am seeking a good total asset (Social Security account and stock/bond portfolio) allocation mix.

Thank you in advance for advice. :D

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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by nisiprius » Fri Jun 21, 2013 7:30 pm

Counting only Investor shares, the Vanguard website currently shows me 117 Vanguard mutual funds: 68 active and 49 index. That seems like a lot of mutual funds. Do you think there need to be so many? Is there any harm in having too many?
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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by VTXVX » Fri Jun 21, 2013 7:39 pm

umfundi wrote:Rules of Thumb for Asset Allocation.

Do you have a rule of thumb for Asset Allocation (AA), such as age in bonds?

Should one's AA be adjusted for a pension, Social Security, or some other income stream? If so, how?

Should one rebalance (buy and sell assets) to maintain the AA? By which criteria?

============

I know what the Bogleheads general view on these issues is, but there seems to be some disagreement on what Mr. Bogle has said.

Keith

+1

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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by FinancialDave » Thu Jun 27, 2013 11:50 am

To expand on the Asset Allocation question above and relating to a recent CNBC appearance where you mentioned we should be considering the fixed income from pensions and Social Security as part of that allocation -- Say a person is 62, retired with a pension, and already has 75% of their income covered and is not even taking SS yet. If they are fairly aggressive and thinking an appropriate AA is between 40/60 to 60/40 and in a few years the addition of SS will take them to 100% of their needed income, is there really any reason to keep bonds in their portfolio, given that when the fixed income streams are considered the AA is already more conservative than needs to be?
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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by M_to_the_G » Sun Jul 07, 2013 10:18 am

In "Common Sense," you made a very strong case for keeping international stock allocation low (20% or less of global equity). Vanguard is now recommending that 30% or more of a global equity portfolio be dedicated to international stocks. Has your thinking on this changed since you wrote "Common Sense" or would you still caution investors to keep exposure to international stocks below their market weight?

Along that vein, in recent years Vanguard has begun to offer currency-hedged international bond funds to investors and has even added them to the LifeStrategy and Target Date funds. What are your thoughts on international bonds as a part of a diversified portfolio?
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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by Mel Lindauer » Mon Aug 19, 2013 12:11 pm

I've started assembling the questions for Jack. Anyone else have questions?
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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by Rick Ferri » Mon Aug 19, 2013 12:18 pm

What do you think of the concept of "smart beta" that is being heavily promoted by some fund companies?
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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by frugaltype » Mon Aug 19, 2013 12:56 pm

fanofjack wrote:I have heard some say that Social Security should be valued for the sake of asset allocation. Let's assume the income from Social Security is $25,000.00 per annum. Can this be valued at $625,000.00 x 4% = $25,000.00 per annum? If so, should I look at this Social Security valuation as a bond fund or as a balanced fund?

If my investment portfolio is $625,000.00 should it be in a balanced portoflio or in 100% stocks...considering the valuation of my Social Security account? I am seeking a good total asset (Social Security account and stock/bond portfolio) allocation mix.

Thank you in advance for advice. :D
I will throw in my opinion and say no. $625,000.00 x 4% = $25,000.00 means you still have $625,000.00.

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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by jginseattle » Mon Aug 19, 2013 1:55 pm

Where are Vanguard's indexed International equity value funds?

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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by Dick Purcell » Sun Sep 08, 2013 5:09 am

Right now, outfits like Fiduciary360 are training investment advisors in MIS-use of the word fiduciary to increase investor risks and fees. How can that be prevented?

After leading advisor and investor in choice of whole diversified asset classes, they mislead people to think a gamble on an active manager with some holdings within an asset class is the same as investing in the whole diversified asset class. This is not only terrible risk-increasing advice but FLAT DISHONEST!

And they encourage advisors to buy and waste time in floods of statistically meaningless “data” on thousands of those active-manager gambles, which runs up investor fees paid to so-called fiduciary advisors -- and to Fi360 for that so-called “data.”

To prevent misuse of the word fiduciary, do we need a Fiduciary EDUCATION Standard?

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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by VictoriaF » Sun Sep 08, 2013 8:07 am

Jack,

Are we parasites?

Victoria
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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by maj » Sun Sep 08, 2013 11:13 am

Mr. Bogle,

I would appreciate knowing your thoughts regarding investment in
Dividend Appreciation Index and High Dividend Yield Index -vs- LifeStrategy Growth Fund.

Thank you

maj

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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by nisiprius » Sun Sep 08, 2013 1:14 pm

How do you decide when to stay the course and when to adjust it?

In 2001, you wrote "There are an infinite number of strategies worse than this one: Commit, over a period of a few years, half of your assets to a stock index fund and half to a bond index fund... Hold your positions for as long as you live, subject only to infrequent and marginal adjustments as your circumstances change."

Recently, however, you have said that "the Barclays Capital U.S. Aggregate Bond Index is very heavily weighted around 70% in U.S. Treasuries and U.S. agencies, government instruments, if you will. And that 70% is working at a very low yield... Given that historically current yields have been a good predictor of future bond market performance, why would anyone hunker down in the Barclays Aggregate given that yield disadvantage?"

But Total Bond is what it is, and the index it tracks is what it is, and my circumstances have not changed. How do I decide whether or not to "hold [my] positions as long as live," to put it one way, or "hunker down in the Barclay's Aggregate," to put it another?
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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by Beagler » Sun Sep 08, 2013 2:16 pm

Question for Mr. Bogle;

Sir, would you please expound on your thoughts on an investor's expected future Social Security payments as they might affect the asset allocation of a pre-retiree. Does it affect the "age in bonds" rule of thumb?

Thank you, Mr. Bogle, for your untiring work on behalf of the average investor.
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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by abuss368 » Thu Sep 12, 2013 9:35 pm

My question is related to the Total Bond Market Fund:

1) Will the index be updated to include more corporates?
2) Should the index include an allocation to High Yield and TIPS/Inflation bonds considering the size of these markets to be true "Total" fund?
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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by Mel Lindauer » Mon Sep 16, 2013 9:08 am

I'll be closing this down in the next couple of days, so if you've got any final questions for Jack, speak now before it's too late.
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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by Iorek » Tue Sep 17, 2013 9:17 am

Mel Lindauer wrote:I'll be closing this down in the next couple of days, so if you've got any final questions for Jack, speak now before it's too late.
Thanks very much for doing this Mel. I was wondering if you also post a synopsis of the Q&A for people who can't make it. I realize that might be a lot to ask, but it would certainly be appreciated.

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Re: QUESTIONS FOR Q&A WITH JACK BOGLE

Post by Mel Lindauer » Tue Sep 17, 2013 5:10 pm

I'm collecting and preparing the questions for the Conference, so this thread is now closed.
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