John Bogle on What Investors Should Do in Volatile Markets
John Bogle, founder and retired CEO of The Vanguard Group, was on Fox Business News with Liz Claman and commented on the gyrating markets. According to Bogle the traditional reaction by investors when markets are in flux is “don’t just stand there, do something,” when in his opinion the best rule is, “don’t do something, just stand there.”
Bogle sees strange things in the market that aren’t all that surprising. For example, commodities were added to investor’s portfolios because they were a diversifier. Bogle stated, “these things go in waves and the best thing to do is ignore them.”
Claman brought up China’s overnight four percent loss, the worst in four years, and asked Bogle whether investors should be buying or selling. Bogle responded that there are a lot of sellers now, as well as many buyers, and if you’re a seller when will you know when to get back in. He added it’s hard to be right twice.
Claman asked Bogle what he believed was the one mistake Bernanke had made. Bogle said he wasn’t sure Bernanke had made a mistake. He further stated, “He’s trying to solve a severe economic and unemployment problem, and with only one of the two weapons we have at our command…he can do something about monetary policy, but he can do nothing about fiscal policy, and the conventional wisdom is those two must work together, so how about that fiscal policy on capitol hill…they seem stalemated, they seem narrow minded, both sides seem capable of putting their political interests ahead of the nation’s interests and Ben Bernanke has to deal with that and accept it as a fact, and I think we all do for the moment…we always hope wisdom will come, he’s doing what he can, but with one hand tied behind our nation’s back, if you will.”
Claman mentioned the prevalence of ETF trading and how they were 40% of trading after Ben Bernanke referred to the tapering program and asked Bogle if there was a bubble, or danger regarding ETFs. Watch the video below to see the entire interview and Bogle’s answer to that question at the 5 minute point.
Back in August 2012, Bogle predicted stocks would average 7% annual returns for the coming decade based on his his expectations for dividends and earnings growth [link].