Q&A WITH JACK BOGLE AT BOGLEHEADS 9

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
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Mel Lindauer
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Q&A WITH JACK BOGLE AT BOGLEHEADS 9

Post by Mel Lindauer » Fri Jul 16, 2010 8:53 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 national get-together with Jack at Bogleheads 9 in Philadelphia on October 14, 2010. http://www.bogleheads.org/forum/viewtop ... 077#696077

Since we're sold out, 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're registered and plan to attend, you should still post your question(s) for Jack here.

Shortly before Bogleheads 9, 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
Last edited by Mel Lindauer on Tue Oct 05, 2010 11:22 am, edited 1 time in total.
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Post by Indices » Fri Jul 16, 2010 9:08 pm

Dear Mr. Bogle:

Why do you suggest foreign bonds in a portfolio when they are far more likely to default than US treasury backed securities ?

If social security acts as a part of an individual's bond allocation as you have stated recently, how does one measure that?

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Taylor Larimore
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Rebalancing

Post by Taylor Larimore » Fri Jul 16, 2010 9:35 pm

Dear Jack (He likes Bogleheads to call him "Jack):

Would you please give us your thoughts about rebalancing our portfolios?

Thank you.
"Simplicity is the master key to financial success." -- Jack Bogle

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Post by White Coat Investor » Fri Jul 16, 2010 11:29 pm

1) How are you feeling? Better than last year I hope.

2) It seems there is a rush to the bottom expense-wise for mutual funds and ETFs now that investors seem to be more knowledgeable about the importance of minimizing investment expenses. (Schwab and Fidelity index funds, now ETFs with ERs less than 0.1%, commissions nearly zero, loads coming down and often disappearing completely.) Do you realize that much of that is due to the work you have done? To whom or what else do you give credit for this phenomenon?

3) Why are the Vanguard folks so good at indexing? It seems Schwab and Fidelity index funds manage to keep their published ERs as low as or lower than the Vanguard funds, yet their funds repeatedly lag the index by more than the ER, whereas Vanguard is usually either right on the index return minus the ER or even a few basis points better! What do you attribute that to?

Sorry I couldn't make it out to Philly this year. I just moved away from that part of the country. I guess I should have gone to D.C. Bogleheads instead of Fort Worth.
Last edited by White Coat Investor on Sat Jul 17, 2010 12:39 am, edited 1 time in total.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

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Post by tetractys » Fri Jul 16, 2010 11:40 pm

My own course is pretty much set, so I really don't have a question there. But it seems like there's quite a bit of talk about 100% bond portfolios on this forum lately, so my question would be:

Dear Jack,

What about 100% bond or TIP portfolios? Are they a good idea for some people?

Thanks, Tet
RESISTANCE IS FRUITFUL

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Spending in retirement

Post by jidina80 » Sat Jul 17, 2010 2:07 pm

Dear Jack,

Should we have lower expections for spending in retirement today due to today's relatively low stock dividend yields and low interest rates?

Past retirement studies suggested we could spend 4% annually from a balanced portfolio during retirement with relative safety. However, earlier this year columnist Scott Burns suggested those studies may no longer be valid because recent stock dividend yields and interest rates are so low.

William Bernstien seems to agree, writing on the Bogleheads forum that the 4% annual spending guideline was done when nominal equity returns were in the 10% region and today's are much lower, concluding (quote) "So, in my mind, a 4% safe withdrawal rate goes out the window; even 3% may be a stretch."


What's your opinion?

Just
Last edited by jidina80 on Fri Jul 30, 2010 1:11 pm, edited 1 time in total.

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What Should I Do Now That I Am 66 Years Old?

Post by mur44 » Sat Jul 17, 2010 4:11 pm

Hi Jack,

With so many problems plaguing the country, the next
decade could be a repetition of the last (lost) decade.

If that scenario prevails, the retirees are adversely
affected.

Would you advise that I move to 100% TIPs?
Are you still optimistic about the future of this country?

mur44

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Post by bpp » Tue Jul 27, 2010 6:19 pm

[Repeat of a question I submitted last year, which did not get selected.]

Dear Jack,

On behalf of all the non-US-based Bogleheads out there: What domestic/foreign allocation do you recommend for an investor based in a country other than the US -- for example, Japan or the UK? (Where "domestic" of course means the country where the investor lives and plans to retire.)

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Post by haban01 » Tue Jul 27, 2010 8:55 pm

Jack, As we think about all the issues that weigh on our lives today related to the Economy, Jobs/Employment and our personal finances, Would you consider increasing your savings rate given the uncertainty of future equity returns and potential Economy Crisis in the future.

Warm Regards,

Eric Haban
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Low TAX cost will be more important than low TRADING cost

Post by Mr_Efficiency » Fri Jul 30, 2010 12:21 pm

Dear Jack,

Low TRADING cost has been Vanguard's edge in the past. The future, however, belongs to low TAX cost.

Even though Berkshire Hathaway has dramatically less broad holdings than VTSAX, when bought in 2013 and held until 2033 outside of an IRA/401k, BRKA is likely to far outperform VTSAX because BRKA does not force taxable events upon its shareholders. A new form of VTSAX packaged like BRKA, however, would likely outperform every other North American stock investment across that same time period.

There is a vast market need for a family of Vanguard index funds packaged like Berkshire Hathaway. ETFs are NOT the answer because they are tax porous.

Yours,
Mr_Efficiency

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Post by Jack » Fri Jul 30, 2010 4:02 pm

One of the most controversial discussions on this forum in the last year was about Mr. Bogle's suggestion to include pensions and social security as part of the bond allocation. It would be enlightening to have him elaborate on this.

This question could be illustrated with simple example: should a 50-year-old with a $300,000 portfolio and $300,000 in social security benefits be 100% in equities?

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Post by KarlJ » Sat Jul 31, 2010 9:01 pm

Jack, what portion of investments devoted to international stock index funds should be in an emerging markets stock index fund?

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Post by wlpotts » Sun Aug 01, 2010 5:22 am

Jack,

As a stalwart of the small investor, what is your opinion on the worlds demographic shift going forward? Since many post-war developed industrialized countries will be undergoing declines in GDP output and aging populations, how will this affect the investor going forward? Should investors re-evalute their perspectives or maybe even their portfolios?

Thank you,
Warren Potts
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Post by bdavidson » Mon Aug 02, 2010 8:24 am

Jack,

In the past year, I received a record number of marketing campaigns from Vanguard for ETFs and Vanguard Brokerage Services. Is Vanguard's recent push into brokerage services and ETFs a departure from the earlier philosophy of Vanguard under your leadership? Or is Vanguard hitting the competition where it hurts by offering lower-cost services and products in what was an otherwise profitable portion of the financial services industry?

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muni bond rating services

Post by wish2bCFP » Mon Aug 02, 2010 9:45 pm

Mr. Bogle,
How much confidence do you have in the ratings of muni bonds by companies like Moodys, etc.?

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Post by Ed 2 » Mon Aug 02, 2010 11:14 pm

Hi Jack,

For more than 10 years I hear that invest in International equities will have better returns and growth potential than to invest in USA stock companies. It seems to me something missing here. Why such grate economy of USA suppose to be less favorable for investors compare economies of Europe or BRIC countries?

Thank you,
Ed
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Post by bobinberea » Tue Aug 03, 2010 9:41 am

Jack wrote:One of the most controversial discussions on this forum in the last year was about Mr. Bogle's suggestion to include pensions and social security as part of the bond allocation. It would be enlightening to have him elaborate on this.

This question could be illustrated with simple example: should a 50-year-old with a $300,000 portfolio and $300,000 in social security benefits be 100% in equities?
I second this enthusiastically. I have followed closely the multiple threads on this subject, and the topic seems to be of huge interest to lots of folks. It is certainly of great interest and importance to me, personally.

BobinBerea

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Post by Cosmo » Tue Aug 03, 2010 10:29 am

Hi Jack,

Boxers or briefs?

Best Regards,

Cosmo

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Questions for Jack

Post by Taylor Larimore » Tue Aug 03, 2010 11:17 am

Hi Mel:

I hope you filter-out silly questions.
"Simplicity is the master key to financial success." -- Jack Bogle

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Vangaurd Company Structure

Post by jidina80 » Tue Aug 03, 2010 12:48 pm

Jack,

Please help us understand Vanguard's corporate structure. The marketing literature indicates that the company is owned by the funds, which are owned by shareholders. However, we shareholders don't seem to have much opportunity to vote on corporate governance issues.

How can we be assured that Vanguard remains aligned with shareholder interests? How can we be confident that Vanguard won't suffer the same fate as many financial institutions, where management and advisors are overpaid at the expense of us 'owners'?

Just

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Re: Questions for Jack

Post by Mel Lindauer » Tue Aug 03, 2010 11:08 pm

Taylor Larimore wrote:Hi Mel:

I hope you filter-out silly questions.
That goes without saying, Taylor.
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Post by Mel Lindauer » Sat Sep 04, 2010 9:26 pm

Any more questions for Jack?
Best Regards - Mel | | Semper Fi

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Post by nisiprius » Sun Sep 05, 2010 4:25 pm

If company loyalty were not a consideration, if you had to choose among

1) Vanguard Total Stock Market Index Fund, 0.18% ER
2) Fidelity Spartan Total Market Index Fund, 0.10% ER
3) Schwab Total Stock Market Index Fund, 0.09% ER (0.12% before waivers)

which would you choose? A 1% difference in ERs matters, but does an 0.01% difference in ERs really matter, or is there some point at which the difference just gets lost in the noise?
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Post by DartThrower » Mon Sep 06, 2010 9:53 am

Hi Jack.

How did you come to be involved in the National Constitution Center? What was the most rewarding part of your involvement? Thanks.
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BH9 Q&A

Post by misterlucky » Tue Sep 07, 2010 7:11 am

Dear Jack,
– Is "own your age in bonds" still good all-weather advice for upcoming generations?

– Holding a TIPS mutual fund in a retirement account is a popular BH concept. I've read Explore Tips by The Finance Buff, but I'm still not clear on how future interest rate swings can effect the income stream generated during retirement. Any insight?

Thanks for all you've done and continue to do.

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Post by RJB » Sun Sep 12, 2010 10:18 pm

Dear Jack,

What financial regulations do you think the United States still needs for investors and why?

Thank you very much for everything you have done for all investors! I understand that this is an understatement.

Roy

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Post by nisiprius » Mon Sep 13, 2010 8:32 am

In "Enough," you write: "The underestimates in the Consumer Price Index (CPI) are even more egregious."

Could you be specific about the numerical size of that underestimate? As of July 2010, the annual CPI increase was 1.2%. There is a website that claims that as of July 2010 the true inflation rate was nearly 8%.

By "egregious" underestimate, do you mean saying 1.2% when it might be, say, 1.5%? Or do you mean that inflation is really running 7 or 8% annually?

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Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Post by nisiprius » Mon Sep 13, 2010 12:12 pm

We know that past performance, at least in the short and intermediate term, doesn't predict future results. But unless we accept that long-term history has some predictive power, we have nowhere to turn.

But are we stymied, even in the long term, by fundamental changes that take place within the markets themselves over long periods of time? Is the market of 1900 really the same market as the market of today?

What brought this forcibly to mind was a chart I saw of bond interest rates--the blue line in this picture. (The green line is the CPI).

Image

Looking at that curve, it's really hard for me to believe that we are looking at the same thing from 1900 to 1960 as from 1960 to 2010. I don't think anything that happened from 1900-1960 could have prepared anyone for what happened in 1960-2010. And, as the green line shows, it's not just a question of inflation. Do markets change fundamentally long before you can pin down their characteristics... or does it just take more than a century to observe enough behavior to generalize?
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Post by Mel Lindauer » Mon Sep 20, 2010 5:54 pm

There's still time to get your question(s) on the list before I close this thread. Fire away!
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Annuities in Retirement

Post by JLou » Tue Sep 28, 2010 2:55 pm

Mr. Bogle

What is your view on using annuities as a part of one's portfolio during the retirement phase of one's life.

Any specifics such as type, timing, % or amount of portfolio would be most welcome.

Sincerely
JLou

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Post by Mel Lindauer » Fri Oct 01, 2010 9:18 pm

I'm going to be closing this thread down soon to start assembling and printing out the questions for Bogleheads 9, so if you have any questions for Mr. Bogle, you'd better speak up now before it's too late.
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Post by Mel Lindauer » Tue Oct 05, 2010 11:22 am

Thanks for the questions, everyone. This thread is closed. It's off to Philly and Bogleheads 9.
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