ETF investing: Why John Bogle Doesn’t Like ETFs (video)
Summary of video: ETF investing: Why Jack Bogle Doesn’t Like ETFs Actually, for long-term investments, Jack Bogle couldn’t care less whether an investor prefers ETF investing or the traditional index funds. At Vanguard they both own the exact same portfolio, and for investments greater than $10,000 the costs are identical. His objection is to those who believe there is an advantage to being able to trade all day long. Speculation is gambling. Anything other than total market funds is another form of speculation. Transcript of ETF investing: Why Jack Bogle Doesn’t Like ETFs Janet Novack: The dominance of index funds, I believe 28% of the market, is partly due to ETF which are more than half of that. But I gather you are … It’s not that you have something against broad ETF’s per se, you have something against the narrow ones, the managed ones and the way people are using the broad ones, is that it? Jack Bogle: That is exactly it and let me just give it to you a little more specifically. First to be crystal clear on this, I couldn’t care less if an investor decides to go into the Vanguard S&P 500 ETF or into the Vanguard—I had to create a word for this, an acronym to go with ETF—TIF, traditional index fund. They both own exactly the same portfolio, they’re both part of the same portfolio, their returns will be identical. They both go for around 5 or 6 basis points at the admiral class level. Many, many years ago when I was running this place and I perceived a little bit about the future, we put on a pricing thing where you got higher returns as your average investment rose. I think now the admiral threshold is maybe $10,000, so if you got below 10,000 you’re probably paying 10 or 12 basis points. Once you get to $10,000, and they will be identical so I couldn’t care less. If I have a little bias against the ETF it’s because you may say and believe that when trouble comes you will not get out in the middle of the day. The middle of the day, I mean come on. It won’t be the point of that at all. As long as you avoid that type of thing … Janet Novack: You can sleep that night. That’s the reason people get out in the middle of the day. Jack Bogle: Oh wait a minute though, the market went down 300 points in the middle of the day, you got out and it went up 300 points at the second half of the day. I mean a lot of bouncing around is meaningless. In the long run, that’s a nuance, no difference whatsoever. Fine and fine for any broad market index fund which I, in which I would include the total bond market, with some limitation, and the total US stock marke,t and the S&P 500, international, and even if you want to put a little […]
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