"Fear of Finance?" AARP interview with Jack Bogle

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
User avatar
Taylor Larimore
Advisory Board
Posts: 26246
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

"Fear of Finance?" AARP interview with Jack Bogle

Post by Taylor Larimore » Thu Sep 07, 2017 1:59 pm

Bogleheads:

I recently subscribed for AARP membership. When I received my first August/September issue of the AARP magazine, imagine my delight to read a five page interview with Jack Bogle and AARP's Jack Otter. The article included a full page picture of our mentor, Jack Bogle, astride the industry!

These are excerpts by Jack Otter with a last reply by Jack:
"Twenty years of writing about Wall Street has taught me two key lessons: 1. Financial markets appear endlessly complex. The secret to understanding and mastering savings and investments is to keep it simple. 2. Most of that complexity is just noise."

"No one has done more to simplify Wall Street than John C. 'Jack' Bogle. He is the founder of Vanguard, the world's largest mutual fund company, with more than $4 trillion in assets. He is also the creator of the index fund, which lets you participate in the stock market in ways far safer and at lower cost than picking individual stocks."

"You organized Vanguard to be owned by shareholders, rather than publicly traded or privately owned. Someone estimated you'd be worth $28 billion of you'd gone that route. Where has the $28 billion gone?

Jack Bogle: "Into the pockets of our shareholders."
All the excerpts below are by Jack:
"You want some bonds in your portfolio, for safety. But you also need stocks for growth.

"If you have a 7% return your dollar will double in 10 years."

"The stock market is a distraction to the business of investing. -- Don't do something, just stand there."

"The big advantage to investors is the instant diversification that comes with funds, versus buying individual stocks or bonds."

"The cost of money management detracts, dollar for dollar, from your investment returns."

"Absolutely no one knows what the stock market is going to do tomorrow, let alone next year. Nor which sector, style or region will lead and which will lag. Given this absolute uncertainty, the most logical strategy is to invest as broadly as possible."

"When you allocate your assets, you also have to think about how much you get from Social Security."

"In 1993, I wrote that U.S. corporations get about 50% of their profits from international sources. So if you own a U.S. stock funds, you already own an international fund. Since then the U.S. market is up about 720%, and the non-U.S. stock market is up about 230%. and you are taking currency risk if you invest overseas. That doesn't mean I'll be right in the future. -- I would limit yourself to 20% of your portfolio in foreign stocks."

"Dollar cost averaging is a way of getting the average price over time and not putting all your eggs in a one "time" basket, as it were."

"Annuities are highly complex and are sold by people who may not understand them themselves. Variable annuities are very dangerous because they can't always deliver what they promise. -- I probably prefer an immediate annuity, which starts paying you right away."
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

User avatar
Duckie
Posts: 5135
Joined: Thu Mar 08, 2007 2:55 pm

Re: "Fear of Finance?" AARP interview with Jack Bogle

Post by Duckie » Thu Sep 07, 2017 2:56 pm

Taylor Larimore wrote:Jack Otter: "You organized Vanguard to be owned by shareholders, rather than publicly traded or privately owned. Someone estimated you'd be worth $28 billion if you'd gone that route. Where has the $28 billion gone?"

Jack Bogle: "Into the pockets of our shareholders."
Being a "shareholder" I love that answer.

staythecourse
Posts: 5075
Joined: Mon Jan 03, 2011 9:40 am

Re: "Fear of Finance?" AARP interview with Jack Bogle

Post by staythecourse » Thu Sep 07, 2017 3:56 pm

Duckie wrote:
Thu Sep 07, 2017 2:56 pm
Taylor Larimore wrote:Jack Otter: "You organized Vanguard to be owned by shareholders, rather than publicly traded or privately owned. Someone estimated you'd be worth $28 billion if you'd gone that route. Where has the $28 billion gone?"

Jack Bogle: "Into the pockets of our shareholders."
Being a "shareholder" I love that answer.
Man that line gave me goose bumps!!

Don't agree with him on everything, but I would be surprised if there was a man who did more to transform the industry to give the average Joe a fair shake. I can only imagine the investing world now without Jack Bogle.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

User avatar
Taylor Larimore
Advisory Board
Posts: 26246
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

What Warren Buffett says about Jack Bogle

Post by Taylor Larimore » Thu Sep 07, 2017 4:18 pm

Bogleheads:
"If a statue is ever erected to honor the person who has done the most for American investors, the hands down choice should be Jack Bogle." -- Warren Buffett
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

User avatar
tennisplyr
Posts: 1345
Joined: Tue Jan 28, 2014 1:53 pm
Location: Sarasota, FL

Re: "Fear of Finance?" AARP interview with Jack Bogle

Post by tennisplyr » Thu Sep 07, 2017 4:58 pm

Thanks Taylor, I saw this.
Those who move forward with a happy spirit will find that things always work out.

User avatar
abuss368
Posts: 11886
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: "Fear of Finance?" AARP interview with Jack Bogle

Post by abuss368 » Thu Sep 07, 2017 8:52 pm

Great interview.

I just looked at our investment portfolio. Mr. Bogle recommended limiting international to 20% of the portfolio. We allocate 70% to stocks and 30% to bonds. International is 40% of equity. This works out to 20% of the overall investment portfolio.

Thank you Mr. Bogle.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

User avatar
saltycaper
Posts: 2209
Joined: Thu Apr 24, 2014 8:47 pm
Location: The Tower

Re: "Fear of Finance?" AARP interview with Jack Bogle

Post by saltycaper » Thu Sep 07, 2017 10:15 pm

abuss368 wrote:
Thu Sep 07, 2017 8:52 pm
Great interview.

I just looked at our investment portfolio. Mr. Bogle recommended limiting international to 20% of the portfolio. We allocate 70% to stocks and 30% to bonds. International is 40% of equity. This works out to 20% of the overall investment portfolio.

Thank you Mr. Bogle.
That's what it says he said, but I don't think that's what he meant. I think he has always meant 20% of equities. (I do not follow this advice myself.)

Incidentally, I think your international equities are 28% of your overall portfolio, not 20%. (.7*.4=.28)
"I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said." --Alan Greenspan

User avatar
abuss368
Posts: 11886
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: "Fear of Finance?" AARP interview with Jack Bogle

Post by abuss368 » Thu Sep 07, 2017 10:29 pm

saltycaper wrote:
Thu Sep 07, 2017 10:15 pm
abuss368 wrote:
Thu Sep 07, 2017 8:52 pm
Great interview.

I just looked at our investment portfolio. Mr. Bogle recommended limiting international to 20% of the portfolio. We allocate 70% to stocks and 30% to bonds. International is 40% of equity. This works out to 20% of the overall investment portfolio.

Thank you Mr. Bogle.
That's what it says he said, but I don't think that's what he meant. I think he has always meant 20% of equities. (I do not follow this advice myself.)

Incidentally, I think your international equities are 28% of your overall portfolio, not 20%. (.7*.4=.28)
That is a good question. I have read a couple of interviews with Mr. Bogle recently where he said 20% of investment portfolio.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

User avatar
triceratop
Moderator
Posts: 3791
Joined: Tue Aug 04, 2015 8:20 pm
Location: la la land

Re: "Fear of Finance?" AARP interview with Jack Bogle

Post by triceratop » Fri Sep 08, 2017 3:30 am

abuss368 wrote:
Thu Sep 07, 2017 10:29 pm
saltycaper wrote:
Thu Sep 07, 2017 10:15 pm
abuss368 wrote:
Thu Sep 07, 2017 8:52 pm
Great interview.

I just looked at our investment portfolio. Mr. Bogle recommended limiting international to 20% of the portfolio. We allocate 70% to stocks and 30% to bonds. International is 40% of equity. This works out to 20% of the overall investment portfolio.

Thank you Mr. Bogle.
That's what it says he said, but I don't think that's what he meant. I think he has always meant 20% of equities. (I do not follow this advice myself.)

Incidentally, I think your international equities are 28% of your overall portfolio, not 20%. (.7*.4=.28)
That is a good question. I have read a couple of interviews with Mr. Bogle recently where he said 20% of investment portfolio.
Link to these interviews? It's very much not what I expect and to be honest doesn't make a whole lot of sense.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

trasmuss
Posts: 224
Joined: Sun Oct 26, 2008 7:10 am

Re: "Fear of Finance?" AARP interview with Jack Bogle

Post by trasmuss » Fri Sep 08, 2017 4:57 am

Mr. Bogle has been consistent over the years saying a maximum of 20% of equities for international. So if you have 50% stocks he would recommend a MAXIMUM of 10% of the portfolio in international stocks.

There is an interesting webcast available on Vanguard concerning international investing. The person answering the question actually agrees with Mr. Bogle concerning international investing regarding performance. Both Mr. Bogle and this person say that in the long run the performance of international stocks and domestic stocks will likely be pretty much the same. The reason that Vanguard recommends 40% of equities to be international is not to increase total return but to decrease day to day volatility. Thus in their opinion risk adjusted total return may be better.

Mr. Bogle stated in one of his books that he is not that concerned with day to day volatility but rather total return.

Volatility is something to keep in mind when you consider international bonds or international stocks. Yesterday, for example, you made money on international stocks but broke even or lost on domestic stocks. Today it may be the opposite. If that is important to you Vanguard's stance on international investing may make sense for both stocks and bonds.

For me the volatility issue for international bonds is outweighed by their negatives (higher cost, lower dividends, lower quality, and longer duration risk). International stocks are different in that currency risk is a factor. When the dollar is weak (or heading weaker) international stocks can outperform domestic for long periods of time. Domestic stocks have outperformed the last 5 years; it may (or may not) be the start of outperformance for international stocks based on currency risk. International stocks may not be as cheap as they appear based on PE or PB ratios compared to domestic since their growth rate and return on equity are lower.

The bottom line for me; I still don't see value in international bonds but if you are willing to bet that currency risk will be on your side the next few years international stocks may do well. How much do you value decreased day to day volatility? Perhaps if that is a major factor for you international bonds may also hold an appeal.

User avatar
CABob
Posts: 4413
Joined: Sun Feb 25, 2007 8:55 pm
Location: Southern California

Re: "Fear of Finance?" AARP interview with Jack Bogle

Post by CABob » Fri Sep 08, 2017 2:00 pm

Taylor Larimore wrote:
Thu Sep 07, 2017 1:59 pm
Bogleheads:

I recently subscribed for AARP membership. ,,,,
I can't help but wonder what prompted you to join AARP at this time.
Did you realize you met their age restriction?
Did you finally admit that you are retired?
:twisted: :P
Bob

User avatar
Taylor Larimore
Advisory Board
Posts: 26246
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Allan Roth

Post by Taylor Larimore » Fri Sep 08, 2017 9:05 pm

I can't help but wonder what prompted you to join AARP at this time.
CABob:

I recently learned that my good friend and advisor, Allan Roth, CPA, CFA, is the AARP financial columnist. I learn something from anything Allan writes.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle



User avatar
triceratop
Moderator
Posts: 3791
Joined: Tue Aug 04, 2015 8:20 pm
Location: la la land

Re: "Fear of Finance?" AARP interview with Jack Bogle

Post by triceratop » Fri Sep 08, 2017 9:37 pm

Those quotes don't appear to have anything to do with his comments as Taylor excerpted them; what was your purpose in adding them to the discussion?

In any case, I thought we were supposed to buy the haystack rather than search for the needle.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

User avatar
TD2626
Posts: 586
Joined: Thu Mar 16, 2017 3:40 pm

Re: "Fear of Finance?" AARP interview with Jack Bogle

Post by TD2626 » Fri Sep 08, 2017 10:20 pm

Duckie wrote:
Thu Sep 07, 2017 2:56 pm
Taylor Larimore wrote:Jack Otter: "You organized Vanguard to be owned by shareholders, rather than publicly traded or privately owned. Someone estimated you'd be worth $28 billion if you'd gone that route. Where has the $28 billion gone?"

Jack Bogle: "Into the pockets of our shareholders."
Being a "shareholder" I love that answer.
This is a big part of the reason why he is sometimes referred to as St. Jack.

Also - he could have charged his investors 28 billion in excess fees by running 1%+ ER funds - but the public has benefited to the tune of far more than that $28 billion. By operating funds at cost, Vanguard has driven prices down across the industry, saving investors in a wide variety of funds substantial sums.

User avatar
Strayshot
Posts: 275
Joined: Thu Mar 05, 2015 8:04 am
Location: New Mexico

Re: "Fear of Finance?" AARP interview with Jack Bogle

Post by Strayshot » Sat Sep 09, 2017 9:58 am

I posted about this a month ago but Taylor added many more quotes from the article. Mods can feel free to merge the threads. Wish there was a link to the article online.

viewtopic.php?f=10&t=225334

indexonlyplease
Posts: 805
Joined: Thu Apr 30, 2015 12:30 pm
Location: Pembroke Pines, FL

Re: "Fear of Finance?" AARP interview with Jack Bogle

Post by indexonlyplease » Sat Sep 09, 2017 2:50 pm

saltycaper wrote:
Thu Sep 07, 2017 10:15 pm
abuss368 wrote:
Thu Sep 07, 2017 8:52 pm
Great interview.

I just looked at our investment portfolio. Mr. Bogle recommended limiting international to 20% of the portfolio. We allocate 70% to stocks and 30% to bonds. International is 40% of equity. This works out to 20% of the overall investment portfolio.

Thank you Mr. Bogle.
That's what it says he said, but I don't think that's what he meant. I think he has always meant 20% of equities. (I do not follow this advice myself.)

Incidentally, I think your international equities are 28% of your overall portfolio, not 20%. (.7*.4=.28)
I just read little book of commen sense investing and it stated 20% of equities. 40% could be ok because theat is what Vanguard recomends.

User avatar
Uncle Pennybags
Posts: 1836
Joined: Tue Oct 28, 2014 2:05 am

Re: "Fear of Finance?" AARP interview with Jack Bogle

Post by Uncle Pennybags » Sat Sep 09, 2017 4:11 pm

Strayshot wrote:
Sat Sep 09, 2017 9:58 am
I posted about this a month ago but Taylor added many more quotes from the article. Mods can feel free to merge the threads. Wish there was a link to the article online.

viewtopic.php?f=10&t=225334
Mr. Bogle's interviews have stayed the same for a few years. His big change was saying up to 20% foreign is OK, it used to be none. I found the cover for September AARP magazine but not the article.

I was there.
Image

User avatar
CABob
Posts: 4413
Joined: Sun Feb 25, 2007 8:55 pm
Location: Southern California

Re: "Fear of Finance?" AARP interview with Jack Bogle

Post by CABob » Sat Sep 09, 2017 5:19 pm

Uncle Pennybags wrote:
Sat Sep 09, 2017 4:11 pm
Mr. Bogle's interviews have stayed the same for a few years. His big change was saying up to 20% foreign is OK, it used to be none. I found the cover for September AARP magazine but not the article.
It is the August/September 2017 issue with Jessica Lange on the cover. I just received my copy today. The article is on page 54.
Bob

User avatar
Uncle Pennybags
Posts: 1836
Joined: Tue Oct 28, 2014 2:05 am

Re: "Fear of Finance?" AARP interview with Jack Bogle

Post by Uncle Pennybags » Sat Sep 09, 2017 7:17 pm

CABob wrote:
Sat Sep 09, 2017 5:19 pm
Uncle Pennybags wrote:
Sat Sep 09, 2017 4:11 pm
Mr. Bogle's interviews have stayed the same for a few years. His big change was saying up to 20% foreign is OK, it used to be none. I found the cover for September AARP magazine but not the article.
It is the August/September 2017 issue with Jessica Lange on the cover. I just received my copy today. The article is on page 54.
My reference.
http://www.prnewswire.com/news-releases ... 00101.html

User avatar
CABob
Posts: 4413
Joined: Sun Feb 25, 2007 8:55 pm
Location: Southern California

Re: "Fear of Finance?" AARP interview with Jack Bogle

Post by CABob » Sat Sep 09, 2017 7:36 pm

Ah.. the old double cover trick :happy And what was on page 54?
Bob

User avatar
Uncle Pennybags
Posts: 1836
Joined: Tue Oct 28, 2014 2:05 am

Re: "Fear of Finance?" AARP interview with Jack Bogle

Post by Uncle Pennybags » Sat Sep 09, 2017 8:14 pm

CABob wrote:
Sat Sep 09, 2017 7:36 pm
Ah.. the old double cover trick :happy And what was on page 54?
I could only find the cover. AARP doesn't share the inside.



AlbertEinstein
Posts: 5
Joined: Mon Sep 11, 2017 7:55 am

Re: "Fear of Finance?" AARP interview with Jack Bogle

Post by AlbertEinstein » Mon Sep 11, 2017 9:15 am

Mr Bogle mistakes economies for markets. In all but the extremely long term (greater than 20-20 years), this is incorrect. If one claims to ignore shorter terms of investing (and the advantages of diversification and rebalancing), it also makes no sense to have any exposure to bonds.

User avatar
Taylor Larimore
Advisory Board
Posts: 26246
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Nice "mistake."

Post by Taylor Larimore » Mon Sep 11, 2017 9:36 am

Mr Bogle mistakes economies for markets.
Albert Einstein:

Nice "mistake." The U.S. stock market has doubled the international stock market since he first recommended investing 100% in U.S. stocks in Bogle on Mutual Funds published in 1993.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

User avatar
saltycaper
Posts: 2209
Joined: Thu Apr 24, 2014 8:47 pm
Location: The Tower

Re: Nice "mistake."

Post by saltycaper » Mon Sep 11, 2017 1:07 pm

Taylor Larimore wrote:
Mon Sep 11, 2017 9:36 am

Nice "mistake." The U.S. stock market has doubled the international stock market since he first recommended investing 100% in U.S. stocks in Bogle on Mutual Funds published in 1993.
$1 invested in DFA U.S. Small Cap Value at that time is worth approximately 50% more than $1 invested in Vanguard Total US Stock Market. Clearly this Bogle guy is a lousy fund picker.

Also, since this is the Bogleheads, I'll be the person who points out the $28 billion figure as fatuous, as it's predicated on independent events that in fact are dependent on one another.
"I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said." --Alan Greenspan

User avatar
Uncle Pennybags
Posts: 1836
Joined: Tue Oct 28, 2014 2:05 am

Re: Nice "mistake."

Post by Uncle Pennybags » Mon Sep 11, 2017 1:14 pm

saltycaper wrote:
Mon Sep 11, 2017 1:07 pm
$1 invested in DFA U.S. Small Cap Value at that time is worth approximately 50% more than $1 invested in Vanguard Total US Stock Market.
$1 invested picking the Jets to win the Super Bowl will pay $1000 in February. That's better than Bitcoin. :greedy

User avatar
saltycaper
Posts: 2209
Joined: Thu Apr 24, 2014 8:47 pm
Location: The Tower

Re: Nice "mistake."

Post by saltycaper » Mon Sep 11, 2017 1:21 pm

Uncle Pennybags wrote:
Mon Sep 11, 2017 1:14 pm

$1 invested picking the Jets to win the Super Bowl will pay $1000 in February. That's better than Bitcoin. :greedy
So the Jets aren't the latest fad? And here I've been cheering for them all these tears? I'm so out of touch. Does Mr. Bogle root for the Jets? If we could find that out, we'd really be getting somewhere.
"I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said." --Alan Greenspan

MandyT
Posts: 134
Joined: Sat Feb 13, 2016 2:29 pm

Re: Nice "mistake."

Post by MandyT » Wed Sep 13, 2017 10:42 am

saltycaper wrote:
Mon Sep 11, 2017 1:21 pm
So the Jets aren't the latest fad? And here I've been cheering for them all these tears? I'm so out of touch. Does Mr. Bogle root for the Jets? If we could find that out, we'd really be getting somewhere.
I'm not sure if this is a typo or not. It kind of works either way.

User avatar
Uncle Pennybags
Posts: 1836
Joined: Tue Oct 28, 2014 2:05 am

Re: Nice "mistake."

Post by Uncle Pennybags » Wed Sep 13, 2017 11:54 am

saltycaper wrote:
Mon Sep 11, 2017 1:21 pm
oes Mr. Bogle root for the Jets? If we could find that out, we'd really be getting somewhere.
I don't know, he lives in Montclair NJ near Yogi's "fork in the road" so he might be a baseball fan.

User avatar
saltycaper
Posts: 2209
Joined: Thu Apr 24, 2014 8:47 pm
Location: The Tower

Re: Nice "mistake."

Post by saltycaper » Wed Sep 13, 2017 12:18 pm

MandyT wrote:
Wed Sep 13, 2017 10:42 am
saltycaper wrote:
Mon Sep 11, 2017 1:21 pm
So the Jets aren't the latest fad? And here I've been cheering for them all these tears? I'm so out of touch. Does Mr. Bogle root for the Jets? If we could find that out, we'd really be getting somewhere.
I'm not sure if this is a typo or not. It kind of works either way.
:)
"I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said." --Alan Greenspan

User avatar
saltycaper
Posts: 2209
Joined: Thu Apr 24, 2014 8:47 pm
Location: The Tower

Re: Nice "mistake."

Post by saltycaper » Wed Sep 13, 2017 12:25 pm

Uncle Pennybags wrote:
Wed Sep 13, 2017 11:54 am
saltycaper wrote:
Mon Sep 11, 2017 1:21 pm
Does Mr. Bogle root for the Jets? If we could find that out, we'd really be getting somewhere.
I don't know, he lives in Montclair NJ near Yogi's "fork in the road" so he might be a baseball fan.
Indeed, especially if one delineates the choice as America's pastime versus the latest fad. As I'm wont to believe, consistency in thought is important.
"I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said." --Alan Greenspan

Dandy
Posts: 4819
Joined: Sun Apr 25, 2010 7:42 pm

Re: "Fear of Finance?" AARP interview with Jack Bogle

Post by Dandy » Wed Sep 13, 2017 4:22 pm

"When you allocate your assets, you also have to think about how much you get from Social Security."

Think about is a whole lot different than making your Social Security a formal part of your fixed income allocation vs a nice to have income stream that reduces what you need to withdraw from your portfolio.

"Dollar cost averaging is a way of getting the average price over time and not putting all your eggs in a one "time" basket, as it were."
[/quote]

DCA often gets bad reviews from forum members who most often favor lump sum (based on some favorable studies). Yet Mr. Bogle feels it has some usefulness in some unmentioned circumstances.

Jack has said probably 10,000 things about investing and sometimes gets into more details and sometimes the interview is more general. So I don't expect every time he touches on a topic he will give it the exact same response or is even quoted accurately or in context.

But I have always found him to be more flexible than many of his followers. Another example is he often says "stay the course" and yet has said that when the market is extremely overvalued he adjusted down his equity allocation significantly. Again, many don't seem to allow for any course correction even when the market is a historic high or might be overvalued (he didn't define "extremely"). If the leader is flexible maybe we should be careful that we don't become overly dogmatic e.g. free to give our opinion but not infer that it is based on some irrefutable or sacred "law".

User avatar
1210sda
Posts: 1254
Joined: Wed Feb 28, 2007 8:31 am

Re: "Fear of Finance?" AARP interview with Jack Bogle

Post by 1210sda » Thu Sep 14, 2017 1:29 pm

Mr Bogle said on page 57 of the magazine.....If you have a return of 7 percent but paid the manager and wall street 2 percent, you'll make 5 percent......You put up 100 percent of the cash, took 100 percent of the risk and got 33 percent of the return.

Was that possibly a typo?? Shouldn't it say "and got 67 percent of the return"

Maybe I misread the comment.

The message is still meaningful....costs matter!

1210

User avatar
saltycaper
Posts: 2209
Joined: Thu Apr 24, 2014 8:47 pm
Location: The Tower

Re: "Fear of Finance?" AARP interview with Jack Bogle

Post by saltycaper » Thu Sep 14, 2017 2:02 pm

1210sda wrote:
Thu Sep 14, 2017 1:29 pm

Was that possibly a typo?? Shouldn't it say "and got 67 percent of the return"
I cannot read the article. I've previously seen him quote figures by comparing the compounding of return to the compounding of return - cost. (Costs compound too.) See if he's talking about investing over x years or your entire life. Otherwise neither 67% nor 33% make sense to me, unless he's rounding to the nearest 1/3 for no reason in particular.
"I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said." --Alan Greenspan

User avatar
Christine_NM
Posts: 2575
Joined: Tue Feb 20, 2007 1:13 am
Location: New Mexico

Re: "Fear of Finance?" AARP interview with Jack Bogle

Post by Christine_NM » Thu Sep 14, 2017 3:37 pm

1210sda wrote:
Thu Sep 14, 2017 1:29 pm
Mr Bogle said on page 57 of the magazine.....If you have a return of 7 percent but paid the manager and wall street 2 percent, you'll make 5 percent......You put up 100 percent of the cash, took 100 percent of the risk and got 33 percent of the return.

Was that possibly a typo?? Shouldn't it say "and got 67 percent of the return"

Maybe I misread the comment.

The message is still meaningful....costs matter!

1210
No typo. We all want to believe differently, but here's the interview with PBS Frontline where Mr Bogle spells it out, and PBS supplements it with year-by-year data: http://www.pbs.org/wgbh/pages/frontline ... bogle.html. Scroll almost halfway to where he talks about the tyranny of compounding.

I knew costs mattered, but the Frontline interview really crystallized it for me, and the possible result was worse than I ever dreamed.

The results vary depending on the cost used (1%, 2%, 2.5%) but the idea is the same -- over a lifetime, the first money you invest earns the most but dwindles to 33% or so because of yearly costs. The longer the period and the higher the cost, the more dramatic the result.
10% cash 45% stock 45% bond. Retired, w/d rate 1.5%

Post Reply