Individual investors have far too much freedom to make ruinous decisions with their retirement accounts, says Vanguard fund founder Jack Bogle.
Bogle is urging Washington to require retirement plan providers — and all money managers, for that matter — to meet basic client protection standards by creating a new federal retirement board that would make investment choices less risky, Business Week reports.
"I keep hoping I get the attention of the Obama Administration," Bogle says. "This is the most troubling economy and the worst bear market I've ever seen. ... Our system has failed."
Bogle wants the government to create a new retirement board that would simplify account options, clamp down on fees, and making risk more understandable.
Bogle's proposed board would oversee a new kind of defined-contribution account that would replace the salad bowl of options — 401(k), IRA, Roth IRA, Roth 401(k), 403(b) — that currently confront and confound investors.
Bogle, who pioneered low cost, passively managed index funds, says that more fund managers should have seen the bank stock debacle coming but didn't.
"Where the hell were the funds' security analysts?" he asks. "They say they couldn't understand the balance sheet. Then why did they buy the stock?"
Bogle’s belief in passive investing is backed by the numbers.
"There hasn't been a lot of difference in performance between passive and actively managed funds in this down market," Lipper senior research analyst Tom Roseen told The Chicago Tribune.
In the 2002 to 2006 bull market, in fact, index funds beat actively managed funds by 2 percentage points, according to Lipper.
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