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Vanguard's Bogle: 'Be Realistic' When Investing Amid Trump Uncertainty

Vanguard's Bogle: 'Be Realistic' When Investing Amid Trump Uncertainty
(Getty/Chris Kleponis)

By    |   Thursday, 13 April 2017 10:50 PM

Vanguard Group’s Jack Bogle warns investors to “be realistic” when trying to wager financial bets amid such political and economic uncertainty under President Donald Trump.

And the index-investing pioneer also warns that investors should always be prepared for the market to fall by as much as 20% to 30% — or even more.

“It’s hard for me to figure out how this period stands out in an awful lot of good ways,” Bogle told MarketWatch. 

“What the markets seems to be telling us here in the U.S. is that there are a few bullish things going on with the new administration, which is determined to borrow a lot of money to spend a lot of money,” said Bogle, the founder of the Vanguard Group, the world’s largest provider of mutual funds with $4 trillion in global assets under management.

The 87-year-old is also waiting to see how Trump’s touted tax-reform plan turns out.

“My feeling is that anything that increases the gap in wealth in the U.S. is bad for our society and bad for markets. Anything that increases racial division here is bad for our economy,” he said

“So we’re having a battle between the short run and the long run. The short run is bullish, the long run more bearish.”

Investors should expect annual returns of around 4% for equities, he said. For bonds, returns could be even lower.

“We are not going to have Nirvana. We are going to have — I’m quite sure — profits and returns on stocks and bonds over the next decade. But they will be low,” he said.

“I don’t mean to be downbeat. I mean to be realistic,” he added.

He also repeated his two rules of successful investing.

“Presumably you are accumulating money now and putting money away for the future. Do not, under any circumstances, stop doing that. That is the first rule. Don’t stop investing,” he said.

“The second rule is, particularly for the younger people in the world: A good solid market decline is a blessing. You’ll be buying — if you invest each month — stocks at lower and lower prices. Don’t be antagonized by that; use that as an opportunity of a lifetime,” he said.

“In a great bull market, people feel good, they feel optimistic, they want to invest more in stocks. If there’s a big bear market, people are scared to death and want to take money out of stocks,” he said. “They want to put extra money in at the highs and take money out at the lows — their investment program is going to be a total failure. So you need self-discipline.”

And you'd be wise to follow Bogle's advice. Why?

Because one of the most respected investment gurus of all time recently cited Bogle as his hero.

Billionaire investor Warren Buffett praised Bogle in his annual letter to Berkshire Hathaway Inc. shareholders.

The pioneer of indexing was once an outcast in the investment world as he eschewed riches to provide real value to American investors, Buffett wrote.

“In his early years, Jack was frequently mocked by the investment-management industry,” Buffett wrote. “Today, however, he has the satisfaction of knowing that he helped millions of investors realize far better returns on their savings than they otherwise would have earned. He is a hero to them and to me.”

Bogle started the indexing revolution for retail investors in 1976 when he launched the Vanguard 500 Index Fund. The fund, which just passed its 40th anniversary, had $205 billion in assets as of Aug. 31, Bloomberg reported.

(Newsmax wire services contributed to this report).

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The Vanguard veteran says it’s hard to figure out this period — but following his basic rules will deliver opportunity.
Vanguard, Bogle, Investing, Trump
Thursday, 13 April 2017 10:50 PM
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