Confused by Bogle's apparent dislike of ETFs

[Steve Reading]

average ETF investor earned less than average traditional fund owners

Where did you get this from? Thanks.

Here from this article. Go to the question on - Why are ETFs a loser’s game?

He explains it as follows:
With all the cash flows into ETFs, $840 billion in the last 10 years, compared to $400 billion into TIFs, I wondered how TIFs could have kept up in terms of their asset growth. The answer is that ETFs have had $504 billion in market appreciation, and TIFs have had $800 billion. Two-thirds of the growth in TIF assets has been in the form of investment returns, and only one-third of the growth in exchange-traded funds has been investment returns. That’s where the performance differential that I cited earlier comes from. The investor return for TIFs average 7.4%, for ETFs it was 4.6%, even less than the 6.2% investor return in active funds.

Those numbers are not ready for a Financial Analysts Journal article, but if you average them they do cross check closely against the known returns we have for all the ETFs and all the TIFs (Strategic Insight data). It’s a pretty good indication of where things are going.

You would notice that he acknowledges these numbers are not ready for Journal of finances article, but they pass less rigorous cross verification. Having said that, do I think there is cause and effect? I don't know and I don't care very much, because ETFs or Traditional funds don't make any difference to me as far as my own situation is concerned, and I think it doesn't for almost anyone on this forum.

I wish he showed how he's actually getting those numbers. It's not clear to me he's controlling on various important confounding variables. If most ETFs were in fixed income and most TIFs were in equities, that would explain the result for instance.

Any ways, thanks for the link.

[youngpleb]

Bogle once expressed his dislike of ETFs by saying something along the lines of "Why would you want to buy the market at 10 AM and sell it at 1 PM?" He was just a buy and hold type of dude

He didn't appear to have any problems with ETFs themselves, just the frequency at which they are traded.

[JoMoney]

Mr. Bogle also didn't like all the esoteric niche ETF's

http://johncbogle.com/wordpress/2007/02 ... nt-page-1/
http://johncbogle.com/wordpress/wp-cont ... J_2-07.pdf
But if long-term investing was the paradigm for the classic index fund, trading ETFs can only be described as short-term speculation. And it was only a matter of time until trading overwhelmed diversification as the driving force in the ETF world. Of the 690 ETFs in existence today (including 343 in registration at the SEC), only 12 represent broad market segments, such as the Standard & Poor’s 500, the Dow Jones Wilshire Total (U.S.) Stock Market Index, and the Morgan Stanley EAFE (Europe, Australia and Far East) Index of non-U.S. stocks. With each passing day, the market segments available through ETFs seem to get narrower. (Can you believe that we now have a “HealthShares Emerging Cancer” ETF?)

These nouveau index funds starkly contradict each of the principal concepts underlying the original index fund. If the broadest possible diversification was the original paradigm, surely holding small segments of the market offers less diversification and commensurately more risk. If the original paradigm was minimal cost, then holding market-sector index funds that may themselves be low-cost obviates neither the brokerage commissions entailed in trading them nor the tax burdens incurred if one has the good fortune to do so successfully.

[whodidntante]

In the referenced interview, I think he's making an argument that because Blackrock (as an example villian) has a profit motive their interests are not aligned with yours. What do you think he said?

Well, let's gather around the campfire for a scary story. Blackrock, as an evil profit-motivated corporation, will do what they can to grow, to harm or destroy their competitors, and improve earnings. But I think competition in a free market has also produced low-cost, well-implemented, easily purchased investments that you can take from broker to broker over your whole life. We are all better off for that, or for those who cling to their mutual fund only accounts, you at least aren't harmed by it. Well, except for Vanguard. For Vanguard this development is a competitive threat.

Greed and shareholder interests sometimes align with my interests just fine. One loser's game, please.

[alex_686]

Well, let's gather around the campfire for a scary story. Blackrock, as an evil profit-motivated corporation, will do what they can to grow, to harm or destroy their competitors, and improve earnings.

The primary way to increase profits is to increase Assets Under Management. I can only think of highly tangential reasons that Blackrock would encourage speculation. For example, figuring our what speculators want and creating a ETF around that. But for a broad index? Can’t really think of a reason.

Trivia fact of the day, but did you know that Blackrock rolled out a index fund before Bogle and Vanguard? technically it was Wells Fargo, but that division was spun off, etc.

[Tommy]

I can understand ETF as niche investment but absolutely don't understand S&P 500 or any other similar ETF. Are you seriously trading S&P 500 on daily basis? Inability to setup automatic investment - deal breaking for me.

[BogleFan510]

yikes. This is still going on? Bogle was not a saint and his motives were to maximize Vanguard's market position. To suggest he was the only person who recognized that in an information dominant business, as compute costs drop exponentially, the winner is whomever can a race to the bottom fastest, on cost factors, is silly. Schwab, Fidelity, T Rowe Price, Blackrock...many participated in restructuring financial asset trading related costs. Jack was the frontman for an organization, and while he was offering superior value to customers as his strategy to win, he was also always selling his strategy to maximize his organizations relative market position. Vanguard has many successful active funds, do we debate those? Market demanded a good active fund, so they delivered. ETFs vs MFs did not help Vanguard relative market position to competitors, hence he spun a bit of shade. No problem and clearly not a big deal. The market demanded liquidity and efficiency, so we have them.

[abuss368]

So someone had posted this link the other day:

https://www.advisorperspectives.com/art ... jack-bogle

I was reading through the article enjoying it until I got to the final part where he basically called ETFs a loser's game. I own the ETF versions of the 3 fund portfolio at Vanguard, so I was somewhat confused by his dislike of them. Is there something I'm missing?

mrtwstr:

Mr. Bogle is often misunderstood and taken out of context about ETFs. This is what he wrote in his 2019 book, "Stay the Course":

"Yes, broad-based stock and bond ETFs, used properly as long-term investments are good for investors. But as I have often said, "ETFs are fine, just so long as you don't trade them."

If you "own the ETF versions of the 3 fund portfolio at Vanguard," and stay the course, you are on your way to investment success.

Congratulations and best wishes.
Taylor

Jack Bogle's Words of Wisdom: "How could I possibly be against the idea of shares in a low-cost S&P 500 ETF being bought by an investor and held for an investment lifetime?"

Hi Taylor -

I would agree and I think Jack Bogle was very clear on his thoughts for ETFs. As long as we don’t speculate in a far corner of the ETF universe or trade them, investors are fine.

As an additional note, my family engaged Vanguard PAS recently. The transition, which they are very happily with, was 1) to convert to brokerage account platform, and 2) exchange to ETFs.

[abuss368]

So someone had posted this link the other day:

https://www.advisorperspectives.com/art ... jack-bogle

I was reading through the article enjoying it until I got to the final part where he basically called ETFs a loser's game. I own the ETF versions of the 3 fund portfolio at Vanguard, so I was somewhat confused by his dislike of them. Is there something I'm missing?

Thanks!

You’re not missing anything. Bogle didn’t really understand ETFs or how most investors use them, so his criticisms of them will be baffling to anyone looking to understand his position.

He had no issue with ETF's as long as they weren't traded frequently and you picked traditional broad market cap index based ETF's. Rather presumptuous to say he didn't understand them. He also perfectly understood human behavior.

https://youtu.be/axupJeEkDlI

I would agree 100%! To say Jack Bogle did not understand investing is comical at best. Jack Bogle knows more about investing than anyone on the forum!

[abuss368]

WOW, that is presumptuous. Do you really believe that Mr. Bogle "didn't really understand ETFs?

Yes, I believe that.

I don’t think he understood the way in which ETFs would open the door to the phenomenal growth of passive investing which has literally exploded along with the growth of ETFs. Without the ETF structure, index investing would have remained the niche backwater that it was when Bogle was still running Vanguard.

He also assumed, incorrectly, that retail ETF investors would be trading their funds all day every day. Retail investors don’t trade index ETFs any more than they do open end index mutual funds and the data was there for him to see.

Bogle was, indeed, a brilliant man. He was human, though, and like any human had his blind spots. ETFs were one of those.

Jack Bogle know more about investing than anyone on the forum ever will in a lifetime!

[alex_686]

Jack Bogle know more about investing than anyone on the forum ever will in a lifetime!

I will take the other side. Bogle reminds me of people like Christopher Columbus or Thomas Edison. Bold men with bold ideas that changed the world. However, in retrospect, maybe the theories that they based their great discovers were a bit shaky.

[Taylor Larimore]

As an additional note, my family engaged Vanguard PAS recently. The transition, which they are very happily with, was 1) to convert to brokerage account platform, and 2) exchange to ETFs.

abuss368:

Based on your posting history, you may know more about investing than the PAS representative. Nevertheless, I think it is nearly always a good idea for us is to seldom give investment advice to relatives (spouses excepted). This is because whatever we recommend will have periods of underperformance and we will be blamed. It is a burden to be avoided.

Best wishes.
Taylor

Jack Bogle's Words of Wisdom: "The best advisors can help you develop a long-range investment strategy and an intelligent plan for its implementation."

[abuss368]

As an additional note, my family engaged Vanguard PAS recently. The transition, which they are very happily with, was 1) to convert to brokerage account platform, and 2) exchange to ETFs.

abuss368:

Based on your posting history, you may know more about investing than the PAS representative. Nevertheless, I think it is nearly always a good idea for us is to seldom give investment advice to relatives (spouses excepted). This is because whatever we recommend will have periods of underperformance and we will be blamed. It is a burden to be avoided.

Best wishes.
Taylor

Jack Bogle's Words of Wisdom: "The best advisors can help you develop a long-range investment strategy and an intelligent plan for its implementation."

Hi Taylor -

Appreciate the kind words. My sister is extremely happy and actually understands everything much better. I helped years ago before learning over time that using Vanguard PAS (or another low cost provider) may be best.

I now look at Vanguard PAS differently today and as such I may consider for the future years down the road when at or near retirement. There are days where I don’t want to bother and simply outsource. That was one of my motivating reasons to move from the mutual fund platform to the brokerage platform yesterday. The next step will probably be moving from traditional mutual fund to ETFs as Vanguard PAS prefers. They are lower cost and I do not trade.

I have instructions and have had many conversations with my wife to simply “call Vanguard PAS”. I even printed out the website contact information and placed with other important documents. I know one thing: my wife will not hesitate to call and hire them.

[JackoC]

I can understand ETF as niche investment but absolutely don't understand S&P 500 or any other similar ETF. Are you seriously trading S&P 500 on daily basis? Inability to setup automatic investment - deal breaking for me.

There used to be three differences between Vanguard (or index generally) MF's and ETF's worth noting IMO.
-you can trade ETF's intraday. On the bulk of my money the bulk of the time that does not matter. I sometimes do 'rebalancing' in stock at a particular level intraday, but usually with index futures in IRA anyway. And if I really had to wait till close it wouldn't be a big deal.
-used to be that there was a penalty possibly worth considering in that reinvesting in ETF's required trades with commissions. In the age of zero commissions this is not important IMO. Just putting in a trade does not bother me, as long as it's free.
so two relative zeroes so far, for me, but another aspect is not:
-you can borrow against ETF's for contingent liquidity, not MF's generally. I converted Vanguard REIT VGSLX MF shares I hold in my real estate LLC to VNQ ETF for that reason. The LLC can borrow a modest % of the VNQ value at <1.5% with Interactive Brokers and very little chance of margin deficiency, % points below what any bank will lend at (especially without recourse to me personally), and the interest is simply deductible as LLC's business expense. Doing this personally is not as compelling because I naturally have enough personal liquidity, and deductibility of margin interest is a little more tricky in personal case also. But for some people converting to ETF's (Vang MF's where you can as non-taxable event) could be an efficient way to supplement (I'm not saying to rely on it 100%) an 'emergency fund' with free contingent liquidity.

Vanguard ETF's have no tax advantage/disadvantage v Vang MF's so that's not a factor within Vanguard. And the tax differences between other ETF structures and Vanguard's are relatively esoteric. When people say ETF's have a tax advantage they really mean active MF's v index ETF's

On 'esoteric corners of ETF market', I sometimes see value in risky asset classes beyond whole stock index. But I don't necessarily care whether it takes MF or ETF form. I gave the example of REIT where I do care, but in tax deferred I have some risky bonds and you can't borrow in an IRA. So, when I had money in US corporate junk I used the Vanguard MF VWEAX, no ETF equivalent, no problem. More recently I decided I preferred local currency emerging market bonds among risky bonds and shifted over to the ETF EMLC, no identical MF, no problem.

On Jack Bogle I assume his main reason for ambivalence about ETF's (per quotes provided he was not categorically against them) was idea that they encourage trading, market timing etc. A behavioral kind of thing, and people were interested in his opinions on such things (I don't think his statements were always just promoting Vanguard's position in the market). But I know what I want to do with my portfolio and don't care what other people want to do with theirs, so 'ETF's encourage trading' is a zero for me either way.

[columbia]

For average humans, who own Vanguard funds (through VG) the ETF advantage is 1 (maybe 2?) basis point and the ability to do intra-day trading.

The former isnt terribly compelling (albeit an actual difference) and whose 30-60 year portfolio success depends on the latter?

The whole thing seems like arguing over which shade of green is superior.

[dcabler]

For average humans, who own Vanguard funds (through VG) the ETF advantage is 1 (maybe 2?) basis point and the ability to do intra-day trading.

The former isnt terribly compelling (albeit an actual difference) and whose 30-60 year portfolio success depends on the latter?

The whole thing seems like arguing over which shade of green is superior.

+1 Intraday trading is a don't-care for me, though it's nice to know exactly what price I got nearly immediately. For the ETF's I hold, it's mainly because at Fidelity it's a way to hold funds in exactly the indexes I wish to hold them in, when Fidelity doesn't have an equivalent mutual fund and/or when the e/r of the ETF is lower than the equivalent mutual fund. For my taxable account, there's also the tax efficiency of ETF's vs. Mutual funds. There's also the downside of having to wait a few days after selling for the funds to settle before you can reinvest the proceeds, unlike with Mutual Funds.

Cheers

[criticalmass]

So someone had posted this link the other day:

https://www.advisorperspectives.com/art ... jack-bogle

I was reading through the article enjoying it until I got to the final part where he basically called ETFs a loser's game. I own the ETF versions of the 3 fund portfolio at Vanguard, so I was somewhat confused by his dislike of them. Is there something I'm missing?

Thanks!

You’re not missing anything. Bogle didn’t really understand ETFs or how most investors use them, so his criticisms of them will be baffling to anyone looking to understand his position.

Are you sure about your statement above?

Here is what Mr. Bogle wrote:

While I've been deemed to be a principal detractor of ETFs (not without supporting evidence!), my views have been, and remain, far more nuanced: (1) I strongly support broadly diversified index ETFs; (2) I don't care for narrowly focused and speculative ETFs; and (3) I believe that stock trading is ultimately the investor's enemy. I therefore conclude that only appropriate ETFs should be selected by investors. Then they should be held for the long term.

Here's my simple recommendation for ETF investors and TIF* investors alike; emphasize broad-market (e.g. S&P 500) index funds in your portfolios, and don't trade them. Whether you follow this strategy with TIFs or ETFs doesn't really matter. Either way, you're doing the right thing, as long as you stay the course."

For more information and history, see "Stay the Course - The Story of Vanguard and the Index Revolution," Jack Bogle.

The "loser's game" comment is in the context of active managed ETFs by managers whose interests diverge from the investor, and a comparison of investment returns / growth.

*Traditional Index Fund

[stormswami]

I use ETFs (even leveraged) for speculation/trading, but it's my 'fun money' and small % (generally 1%) of our holdings. Those confessions aside, I feel like such an outlier in that I really really despise ETFs. I really dislike the more manual mechanics of ETF purchases. For one, they make me prone to second-guessing and market timing. I greatly prefer and find it healthier with 'out of sight, out of mind' systematic mutual fund purchases in most circumstances. However, for instance, my preference to utilize a Golden Butterfly-type portfolio for some accounts (HSA) essentially necessitates me partially using ETFs. I'd rather do so through mutual funds and not have to manually make ETF purchases.

[vineviz]

You’re not missing anything. Bogle didn’t really understand ETFs or how most investors use them, so his criticisms of them will be baffling to anyone looking to understand his position.

Are you sure about your statement above?

Yes. Bogle literally spent decades on the wrong side of the ETF debate.

In an interview with Morningstar's Christine Benz, Gus Sauter (who was head of Vanguard when their ETFs launched and whose name is on their patent for their ETF structure) made it pretty clear.

Benz: You mentioned some of the areas of active debate that you had with Mr. Bogle over the years: the size of indexing, when it would become too large, was one. What were some of the other things that you and he would engage over and have active debates about?<

Sauter: Oh boy. Well, I guess the biggest one would be ETFs. And Jack was really against ETFs. I think all of senior management, most people at Vanguard believed in long-term investing. And Jack viewed ETFs as nothing but short-term investing. And so, he just believed that if you could trade it, you would trade it and I felt that you didn't necessarily have to trade something just because you could. And then, we developed ETFs—actually, when jack was away on vacation. Jack had already retired at this point in time, but he had his research center still at Vanguard, and he always took the month of August off, going back 30, 40 years. And he had a place at Lake Placid and spent the month at Lake Placid. Well, we announced while he was at Lake Placid that we were getting into the ETF business. And I remember, when he got back, I just happened to run into him. The day that he got back at Vanguard, most of the people, actually eat in the same cafeteria that we called a galley, and it had a bottom floor that you could enter in but also an upper level with a balcony overlooking the foyer down below. And I was going in the foyer down below. Jack happened to be standing at the top of the balcony looking down and he saw me, and he yelled out—and Jack had a booming voice. And he yelled out, “Gus, what the heck is going on around here?” And everybody in the place—and there had to be 150 people in there—everybody just kind of froze. I know I did. So, as I said, great to see you again, Jack. How was vacation? So, we really strongly disagreed about ETFs and I just viewed it as a way to distribute an index and not a new product. I'd say that was our biggest disagreement.

Benz: And he softened a bit on that toward the end of his life, I would say?

Sauter: You know, somebody said that, not with me. But somebody else to me, oh, yeah, he's OK with them now.

Benz: I think he said that to me in an interview that he thought that some people were using them wisely.

Sauter: Oh, well, that's great to hear. I wish he would have confided that in me.

[abuss368]

You’re not missing anything. Bogle didn’t really understand ETFs or how most investors use them, so his criticisms of them will be baffling to anyone looking to understand his position.

Are you sure about your statement above?

Yes. Bogle literally spent decades on the wrong side of the ETF debate.

In an interview with Morningstar's Christine Benz, Gus Sauter (who was head of Vanguard when their ETFs launched and whose name is on their patent for their ETF structure) made it pretty clear.

Benz: You mentioned some of the areas of active debate that you had with Mr. Bogle over the years: the size of indexing, when it would become too large, was one. What were some of the other things that you and he would engage over and have active debates about?<

Sauter: Oh boy. Well, I guess the biggest one would be ETFs. And Jack was really against ETFs. I think all of senior management, most people at Vanguard believed in long-term investing. And Jack viewed ETFs as nothing but short-term investing. And so, he just believed that if you could trade it, you would trade it and I felt that you didn't necessarily have to trade something just because you could. And then, we developed ETFs—actually, when jack was away on vacation. Jack had already retired at this point in time, but he had his research center still at Vanguard, and he always took the month of August off, going back 30, 40 years. And he had a place at Lake Placid and spent the month at Lake Placid. Well, we announced while he was at Lake Placid that we were getting into the ETF business. And I remember, when he got back, I just happened to run into him. The day that he got back at Vanguard, most of the people, actually eat in the same cafeteria that we called a galley, and it had a bottom floor that you could enter in but also an upper level with a balcony overlooking the foyer down below. And I was going in the foyer down below. Jack happened to be standing at the top of the balcony looking down and he saw me, and he yelled out—and Jack had a booming voice. And he yelled out, “Gus, what the heck is going on around here?” And everybody in the place—and there had to be 150 people in there—everybody just kind of froze. I know I did. So, as I said, great to see you again, Jack. How was vacation? So, we really strongly disagreed about ETFs and I just viewed it as a way to distribute an index and not a new product. I'd say that was our biggest disagreement.

Benz: And he softened a bit on that toward the end of his life, I would say?

Sauter: You know, somebody said that, not with me. But somebody else to me, oh, yeah, he's OK with them now.

Benz: I think he said that to me in an interview that he thought that some people were using them wisely.

Sauter: Oh, well, that's great to hear. I wish he would have confided that in me.

Mr. Bogle has stated in interviews that he thoughts ETFs would encourage investors to trade. However, he also stated that if anyone wanted an ETF to hold “forever” or the long term, that was fine. Just don’t trade them!

[FrugalInvestor]

So someone had posted this link the other day:

https://www.advisorperspectives.com/art ... jack-bogle

I was reading through the article enjoying it until I got to the final part where he basically called ETFs a loser's game. I own the ETF versions of the 3 fund portfolio at Vanguard, so I was somewhat confused by his dislike of them. Is there something I'm missing?

Thanks!

You’re not missing anything. Bogle didn’t really understand ETFs or how most investors use them, so his criticisms of them will be baffling to anyone looking to understand his position.

WOW, that is presumptuous. Do you really believe that Mr. Bogle "didn't really understand ETFs? He was a brilliant man and I think that he completely understood them. He was just concerned that they would entice people to become traders rather than investors.

Of course he understood them, and he understood their potential dangers to the typical investor better than most. As a general rule regular participants on this board are not in that category.

[criticalmass]

You’re not missing anything. Bogle didn’t really understand ETFs or how most investors use them, so his criticisms of them will be baffling to anyone looking to understand his position.

Are you sure about your statement above?

Yes. Bogle literally spent decades on the wrong side of the ETF debate.

Context is important. The context of the quote you provide is regarding ETFs used for short term investing and speculative ETFs. Indeed many ETFs are traded frequently, and a significant number are "Concentrated/Speculative" vs. TIFs.
I also note that you were quoting Mr. Sauter, not Mr. Bogle.

What Mr. Bogle actually said was, "Yes, broad-based stock and bond ETFs, used properly as long-term investments, are good for investors. But as I have often said, "ETFs are fine, just so long as you don't trade them." How could I possibly be against the idea of shares in a low-cost S&P 500 ETF being bought by an investor and held for an investment lifetime?"

[vineviz]

Context is important. The context of the quote you provide is regarding ETFs used for short term investing and speculative ETFs.

Not true.

The context of the quotes I provided is that Bogle was passionately opposed to ETFs, until he wasn't.

More specifically, he was passionately opposed to Vanguard's ETFs at a time when the only ETFs Vanguard was planning to offer were Vanguard Total Stock Market ETF (VTI) and Vanguard Extended Market ETF (VXF).

[abuss368]

Context is important. The context of the quote you provide is regarding ETFs used for short term investing and speculative ETFs.

Not true.

The context of the quotes I provided is that Bogle was passionately opposed to ETFs, until he wasn't.

More specifically, he was passionately opposed to Vanguard's ETFs at a time when the only ETFs Vanguard was planning to offer were Vanguard Total Stock Market ETF (VTI) and Vanguard Extended Market ETF (VXF).

This is incorrect. Jack Bogle was opposed to them as he thought investors would be encouraged to trade them. Do you have Jack Bogle’s books on your shelf?

[AZAttorney11]

Why is it so hard for some on this forum to acknowledge that Bogle was wrong on something, or later changed his views based on new evidence? Isn’t that what we all strive to do as thoughtful investors? It’s bizarre that some rabidly defend Bogle at every turn and assume he was perfect. No one is. Bogle wasn’t any different.

[vineviz]

Jack Bogle was opposed to them as he thought investors would be encouraged to trade them.

Precisely, and he clearly turned out to be wrong about this.

[criticalmass]

Jack Bogle was opposed to them as he thought investors would be encouraged to trade them.

Precisely, and he clearly turned out to be wrong about this.

"Yes, broad-based stock and bond ETFs, used properly as long-term investments, are good for investors. But as I have often said, "ETFs are fine, just so long as you don't trade them." How could I possibly be against the idea of shares in a low-cost S&P 500 ETF being bought by an investor and held for an investment lifetime?" -Jack Bogle

[criticalmass]

Why is it so hard for some on this forum to acknowledge that Bogle was wrong on something, or later changed his views based on new evidence? Isn’t that what we all strive to do as thoughtful investors? It’s bizarre that some rabidly defend Bogle at every turn and assume he was perfect. No one is. Bogle wasn’t any different.

I don't defend Bogle, nor did he need me and others to defend him. But if accuracy is important, it is important to state what the man actually said, versus what others implied.

[absolute zero]

Why is it so hard for some on this forum to acknowledge that Bogle was wrong on something, or later changed his views based on new evidence? Isn’t that what we all strive to do as thoughtful investors? It’s bizarre that some rabidly defend Bogle at every turn and assume he was perfect. No one is. Bogle wasn’t any different.

I’m not going to name any *specific* topics, but I think some people that rely upon Bogle’s advice for certain investment decisions find it easier to imagine that he was 100% right, 100% of the time. If they let themselves acknowledge that he may have been wrong about something (like ETF’s) then they suddenly have to come to grips that maybe he was wrong about other things too. That’s uncomfortable for some investors to think about.

Just my theory.

[vineviz]

Why is it so hard for some on this forum to acknowledge that Bogle was wrong on something, or later changed his views based on new evidence? Isn’t that what we all strive to do as thoughtful investors? It’s bizarre that some rabidly defend Bogle at every turn and assume he was perfect. No one is. Bogle wasn’t any different.

I’m not going to name any *specific* topics, but I think some people that rely upon Bogle’s advice for certain investment decisions find it easier to imagine that he was 100% right, 100% of the time. If they let themselves acknowledge that he may have been wrong about something (like ETF’s) then they suddenly have to come to grips that maybe he was wrong about other things too. That’s uncomfortable for some investors to think about.

Just my theory.

It’s a cogent theory.

[Dave55]

WOW, that is presumptuous. Do you really believe that Mr. Bogle "didn't really understand ETFs?

Yes, I believe that.

I don’t think he understood the way in which ETFs would open the door to the phenomenal growth of passive investing which has literally exploded along with the growth of ETFs. Without the ETF structure, index investing would have remained the niche backwater that it was when Bogle was still running Vanguard.

He also assumed, incorrectly, that retail ETF investors would be trading their funds all day every day. Retail investors don’t trade index ETFs any more than they do open end index mutual funds and the data was there for him to see.

Bogle was, indeed, a brilliant man. He was human, though, and like any human had his blind spots. ETFs were one of those.

Jack Bogle know more about investing than anyone on the forum ever will in a lifetime!

Tony, I was following all of your buys and sells for years now and

Dave

[spdoublebass]

Context is important. The context of the quote you provide is regarding ETFs used for short term investing and speculative ETFs.

Not true.

The context of the quotes I provided is that Bogle was passionately opposed to ETFs, until he wasn't.

More specifically, he was passionately opposed to Vanguard's ETFs at a time when the only ETFs Vanguard was planning to offer were Vanguard Total Stock Market ETF (VTI) and Vanguard Extended Market ETF (VXF).

This is incorrect. Jack Bogle was opposed to them as he thought investors would be encouraged to trade them. Do you have Jack Bogle’s books on your shelf?

I don’t understand this as a defense of Mr. Bogle. You are proving Vineviz’s point. Bogle was opposed to them when he shouldn’t have been. They are cheaper and more tax efficient. If he was for them he would have encouraged people to make the switch to ETFs, or at least to consider it. Most people didn’t consider ETFs because of what Bogle said publicly. Even when I started out I was worried about ETFs because of what Bogle said. Now that I own both I see there is nothing to worry about. I like to buy mutual funds and when they reach a certain amount I convert them over to ETFs. Cheaper. Simple.

[abuss368]

Jack Bogle was opposed to them as he thought investors would be encouraged to trade them.

Precisely, and he clearly turned out to be wrong about this.

Wrong! He was correct about ETFs! Crazy obscure parts of the markets and investors would trade them. He had no problem for anyone who bought and held long term. Do you have Jack Bogle’s books on your shelf? He was very clear here.

[abuss368]

Mr. Bogle also didn't like all the esoteric niche ETF's

http://johncbogle.com/wordpress/2007/02 ... nt-page-1/
http://johncbogle.com/wordpress/wp-cont ... J_2-07.pdf
But if long-term investing was the paradigm for the classic index fund, trading ETFs can only be described as short-term speculation. And it was only a matter of time until trading overwhelmed diversification as the driving force in the ETF world. Of the 690 ETFs in existence today (including 343 in registration at the SEC), only 12 represent broad market segments, such as the Standard & Poor’s 500, the Dow Jones Wilshire Total (U.S.) Stock Market Index, and the Morgan Stanley EAFE (Europe, Australia and Far East) Index of non-U.S. stocks. With each passing day, the market segments available through ETFs seem to get narrower. (Can you believe that we now have a “HealthShares Emerging Cancer” ETF?)

These nouveau index funds starkly contradict each of the principal concepts underlying the original index fund. If the broadest possible diversification was the original paradigm, surely holding small segments of the market offers less diversification and commensurately more risk. If the original paradigm was minimal cost, then holding market-sector index funds that may themselves be low-cost obviates neither the brokerage commissions entailed in trading them nor the tax burdens incurred if one has the good fortune to do so successfully.

Exactly. All in Jack’s books very clearly!

[Vulcan]

I was reading through the article enjoying it until I got to the final part where he basically called ETFs a loser's game. I own the ETF versions of the 3 fund portfolio at Vanguard, so I was somewhat confused by his dislike of them. Is there something I'm missing?

Read this

viewtopic.php?t=148757#p2223489

[abuss368]

Jack Bogle was opposed to them as he thought investors would be encouraged to trade them.

Precisely, and he clearly turned out to be wrong about this.

"Yes, broad-based stock and bond ETFs, used properly as long-term investments, are good for investors. But as I have often said, "ETFs are fine, just so long as you don't trade them." How could I possibly be against the idea of shares in a low-cost S&P 500 ETF being bought by an investor and held for an investment lifetime?" -Jack Bogle

Perfect and thank you for posting! I was pulling one of his books from my shelf to post that.

[abuss368]

WOW, that is presumptuous. Do you really believe that Mr. Bogle "didn't really understand ETFs?

Yes, I believe that.

I don’t think he understood the way in which ETFs would open the door to the phenomenal growth of passive investing which has literally exploded along with the growth of ETFs. Without the ETF structure, index investing would have remained the niche backwater that it was when Bogle was still running Vanguard.

He also assumed, incorrectly, that retail ETF investors would be trading their funds all day every day. Retail investors don’t trade index ETFs any more than they do open end index mutual funds and the data was there for him to see.

Bogle was, indeed, a brilliant man. He was human, though, and like any human had his blind spots. ETFs were one of those.

Jack Bogle know more about investing than anyone on the forum ever will in a lifetime!

Tony, I was following all of your buys and sells for years now and

Dave

Your good Dave! That made me laugh!

Thank you sir!

[vineviz]

Jack Bogle was opposed to them as he thought investors would be encouraged to trade them.

Precisely, and he clearly turned out to be wrong about this.

Wrong! He was correct about ETFs! Crazy obscure parts of the markets and investors would trade them. He had no problem for anyone who bought and held long term. Do you have Jack Bogle’s books on your shelf? He was very clear here.

Nonsense. It’s not even a matter of opinion: the evidence is clear that ETFs do not encourage investors to trade more.

Bogle had a hypothesis, and the evidence refutes it. Why is it so hard to imagine that in long and successful career he might not OCCASIONALLY get some things wrong?

He had no problem admitting as much: he was a humble and gracious man according to pretty much everyone who knew him.

Why are you so sure he was infallible on every conceivable topic?

[000]

It's easier for me to rebalance ETF <--> ETF and ETF <--> stock than Plain Old Mutual Fund <--> ETF or stock.

As long as there are things in my portfolio not available as Plain Old Mutual Funds, I will stick with ETFs.

[000]

I’m not going to name any *specific* topics, but I think some people that rely upon Bogle’s advice for certain investment decisions find it easier to imagine that he was 100% right, 100% of the time. If they let themselves acknowledge that he may have been wrong about something (like ETF’s) then they suddenly have to come to grips that maybe he was wrong about other things too. That’s uncomfortable for some investors to think about.

Just my theory.

I agree. But this cognitive dissonance seems to extend beyond "Bogle believers", e.g. to "modern finance theory believers".

[abuss368]

Jack Bogle was opposed to them as he thought investors would be encouraged to trade them.

Precisely, and he clearly turned out to be wrong about this.

Wrong! He was correct about ETFs! Crazy obscure parts of the markets and investors would trade them. He had no problem for anyone who bought and held long term. Do you have Jack Bogle’s books on your shelf? He was very clear here.

Nonsense. It’s not even a matter of opinion: the evidence is clear that ETFs do not encourage investors to trade more.

Bogle had a hypothesis, and the evidence refutes it. Why is it so hard to imagine that in long and successful career he might not OCCASIONALLY get some things wrong?

He had no problem admitting as much: he was a humble and gracious man according to pretty much everyone who knew him.

Why are you so sure he was infallible on every conceivable topic?

Blasphemy! Not even close to correct when reading Jack Bogle’s books! He has no issues with ETF held for the long term (see quote from above) but did not like if encourage trading or far corners of market. How many book of his do you have and have read?

[abuss368]

It's easier for me to rebalance ETF <--> ETF and ETF <--> stock than Plain Old Mutual Fund <--> ETF or stock.

As long as there are things in my portfolio not available as Plain Old Mutual Funds, I will stick with ETFs.

Agreed and Vanguard imposes a 30 day trading limit on mutual funds to protect existing mutual fund shareholders.

[TropikThunder]

I would agree 100%! To say Jack Bogle did not understand investing is comical at best. Jack Bogle knows more about investing than anyone on the forum!

Wrong! He was correct about ETFs! Crazy obscure parts of the markets and investors would trade them. He had no problem for anyone who bought and held long term. Do you have Jack Bogle’s books on your shelf? He was very clear here.

Blasphemy! Not even close to correct when reading Jack Bogle’s books! He has no issues with ETF held for the long term (see quote from above) but did not like if encourage trading or far corners of market. How many book of his do you have and have read?

Good lord, it's like when a 6-year old hears someone insult their dad.

[1789]

I would agree 100%! To say Jack Bogle did not understand investing is comical at best. Jack Bogle knows more about investing than anyone on the forum!

Wrong! He was correct about ETFs! Crazy obscure parts of the markets and investors would trade them. He had no problem for anyone who bought and held long term. Do you have Jack Bogle’s books on your shelf? He was very clear here.

Blasphemy! Not even close to correct when reading Jack Bogle’s books! He has no issues with ETF held for the long term (see quote from above) but did not like if encourage trading or far corners of market. How many book of his do you have and have read?

Good lord, it's like when a 6-year old hears someone insult their dad.

“While i’ve been deemed to be a principal detractor of ETFs (not without supporting any evidence!), my views have been, and remain, far more nuanced: (1) I strongly support broadly diversified index ETFs; (2) I don’t care for narrowly focused and speculative ETFs; and (3) I believe that stock trading is ultimately the investor’s enemy. I therefore conclude that only appropriate ETFs should be selected by investors. Then, they should be held for the long term.
Here’s my simple recommendation for ETF investors and TIF investors alike: emphasize broad-market (e.g.,S&P 500) index funds in your portfolios, and don’t trade them. Whether you follow this strategy with TIFs or ETFs doesn't really matter. Either way, you’re doing the right thing, as long as you stay the course.”

Stay the Course (2018), page 118-119

Whether we like him or hate him, the guy saw the future. SPY is the most traded security in the universe. I have seen the proof when i talk to people in my circle. They always talk about which stock they sell and which ETF they buy in turn. Always... i have never seen a person talking about selling VFIAX and buying VTSAX every couple days. Never.

[vineviz]

I would agree 100%! To say Jack Bogle did not understand investing is comical at best. Jack Bogle knows more about investing than anyone on the forum!

Wrong! He was correct about ETFs! Crazy obscure parts of the markets and investors would trade them. He had no problem for anyone who bought and held long term. Do you have Jack Bogle’s books on your shelf? He was very clear here.

Blasphemy! Not even close to correct when reading Jack Bogle’s books! He has no issues with ETF held for the long term (see quote from above) but did not like if encourage trading or far corners of market. How many book of his do you have and have read?

Good lord, it's like when a 6-year old hears someone insult their dad.

“While i’ve been deemed to be a principal detractor of ETFs (not without supporting any evidence!), my views have been, and remain, far more nuanced: (1) I strongly support broadly diversified index ETFs; (2) I don’t care for narrowly focused and speculative ETFs; and (3) I believe that stock trading is ultimately the investor’s enemy. I therefore conclude that only appropriate ETFs should be selected by investors. Then, they should be held for the long term.
Here’s my simple recommendation for ETF investors and TIF investors alike: emphasize broad-market (e.g.,S&P 500) index funds in your portfolios, and don’t trade them. Whether you follow this strategy with TIFs or ETFs doesn't really matter. Either way, you’re doing the right thing, as long as you stay the course.”

Stay the Course (2018), page 118-119

Whether we like him or hate him, the guy saw the future. SPY is the most traded security in the universe. I have seen the proof when i talk to people in my circle. They always talk about which stock they sell and which ETF they buy in turn. Always... i have never seen a person talking about selling VFIAX and buying VTSAX every couple days. Never.

I love that this Bogle quote, trotted out so many times in this thread, includes a concession IN THE VERY FIRST SENTENCE that that the people who accused him of opposing ETFs aren’t wrong.

Kudos to the man for realizing he should take a more nuanced view of the world, but there are plenty of people that didn’t need two decades of convincing to realize the same thing.

[abuss368]

Mr. Bogle is often misunderstood and taken out of context about ETFs. This is what he wrote in his 2019 book, "Stay the Course":

"Yes, broad-based stock and bond ETFs, used properly as long-term investments are good for investors. But as I have often said, "ETFs are fine, just so long as you don't trade them."

It is likely that people are confused by the fact that he said contradictory things at different times.

I agree that he softened his stance towards the end of his life, though as we can see his waffling did some damage.

That is simply not true! Jack Bogle has always been clear regarding ETFs as Taylor noted above. No problem as long as you don’t trade them.

[spdoublebass]

Mr. Bogle is often misunderstood and taken out of context about ETFs. This is what he wrote in his 2019 book, "Stay the Course":

"Yes, broad-based stock and bond ETFs, used properly as long-term investments are good for investors. But as I have often said, "ETFs are fine, just so long as you don't trade them."

It is likely that people are confused by the fact that he said contradictory things at different times.

I agree that he softened his stance towards the end of his life, though as we can see his waffling did some damage.

That is simply not true! Jack Bogle has always been clear regarding ETFs as Taylor noted above. No problem as long as you don’t trade them.

Respectfully, you keep repeating yourself, but it's not helping.

Nobody here is disputing that in 2018, Mr. Bogle said the quote you posted.

When did Mr. Bogle recommend ETF's equally with mutual funds? Was it in the 90's? Did Bogle recommend SPY in the 90's equally with mutual funds? I do not believe he did BECAUSE he assumed one would end up trading it. I think this is the point trying to be made here.

[mrtwstr]

Wow I really didn't expect my question to kick off this whole thread of disagreement

[Broken Man 1999]

Wow I really didn't expect my question to kick off this whole thread of disagreement

Have you read, or listened to any of Mr Bogle's books/interviews/articles, etc. yet? Going to the ample media Mr Bogle generated would give you his thoughts unfiltered, unbiased, and certainly with more accuracy!

Or, you can read what others think of his written words, or utterances, sometimes with little context. I know what I prefer!

Broken Man 1999

[mrtwstr]

Yes... this entire thread is based off an interview from a couple years ago. So that's why I asked.