Tags: Jack Bogle | Vanguard | stock return | investors

Vanguard's Bogle: 'Be Prepared for Lower Returns at Historical Norms'

By    |   Wednesday, 23 April 2014 10:32 AM

Investors should drop any expectations that the stock market can keep up its performance of last year, when the S&P 500 Index generated a juicy total return of 32.4 percent, says Jack Bogle founder of the Vanguard Group.

"Over the next 10 years, or even longer, dividend yields are going to contribute 2 percent to the return, and they'll probably grow at the rate of earnings growth, which could be as high as 5 [percent]," he tells CNBC.

"So I think something like a 7 percent future return is going to be what people are going to have to accept," Bogle notes.

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Longer-term stocks can return 9 percent a year, thanks to a long-term dividend yield of 4.5 percent, he maintains. "We just have to be prepared for lower returns at historical norms."

As for the present, with the S&P 500 standing 1 percent from its record high, "the market is probably a little on the high side of fair value, but not enough to make me take an investment action," Bogle adds.

The companies that have reported first-quarter profits are trading at 20 times earnings, he said.

Nobel laureate economist Robert Shiller of Yale University says that while stocks are expensive on a valuation basis, you should still own them.

"We're just not living in the best of times," he tells Yahoo. "Momentum is weakening in housing, stocks look overpriced, bonds are paying poorly. There's risk there too. There's no easy way to win in this market, so I'm thinking you have diversify and keep something in stocks."

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Investors should drop any expectations that the stock market can keep up its performance of last year, when the S&P 500 Index generated a juicy total return of 32.4 percent, says Jack Bogle founder of the Vanguard Group.
Jack Bogle, Vanguard, stock return, investors
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2014-32-23
Wednesday, 23 April 2014 10:32 AM
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