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Words of Wisdom from Jack Bogle

Never one to mince words, the grandfather of index fund investing had no shortage of quotable moments at the recent Morningstar Investment Conference

Jason Stipp 14 June, 2013 | 7:00AM

Attendees tune in to the conversation between Jack Bogle and Morningstar's Don Phillips Thursday morning at the Morningstar Investment Conference in Chicago.

Vanguard founder Jack Bogle expounded on a number of topics—from money market funds to the retirement system to the state of the fund industry—on Thursday morning at the 25th annual Morningstar Investment Conference. Never one to mince words, the grandfather of index fund investing had no shortage of quotable moments: 

On retirement: “We’re headed for three train wrecks.”
Echoing language he’s used before to describe the current US retirement system, Bogle cited three areas of concern: underfunded Social Security (it can be fixed, he said; all that’s required is some political will); dramatically underfunded state and corporate pensions (they know their expected returns are unrealistic, but they all say they’ll hire good managers), and over-reliance on defined-contribution plans that aren’t strict enough to ensure success.

On government bonds: “70% of the [Barclays Aggregate] bond index in Treasuries is too much.”
Echoing his sentiments from a recent Morningstar.com video interview, Bogle argued that the index’s stake in Treasuries and agencies is disproportionately high. Should it be 0%? No, he said. But neither should it be 70%.

On the Role of Social Security: “It’s probably the best fixed-income position you’ll ever have.”
With its steady payments and cost-of-living adjustments, Social Security is a key piece of retirees’ portfolios. But Bogle said we need to look at Social Security in the whole portfolio picture. If your investment portfolio is entirely fixed income, and Social Security is also playing that role in your holistic financial picture, is it too much fixed income?

On occasions that he disagrees with Vanguard: “It doesn’t happen.”
Rather, Bogle asserted, Vanguard disagrees with me.  “They’re in a tough place,” he added. “Here’s this old guy who keeps saying what he thinks. Would he just shut the ….”

On the strength of his convictions: “I’m too old to speak out on an issue I don’t vigorously believe in.”
Given the positive impact Bogle has had for fund investors over the decades, we're glad he didn't wait to speak out.  

On the role of fund shareholder activism: “Corporate America needs a lot of cleanup.”
Bogle estimated that the fund industry owns 35% of all stock in the US, and actually much more given that many of those same managers also run institutional money. “We control corporate America,” he said, “and corporate America needs a lot of clean-up, house clean-up. … If the shareholders don’t speak, nobody is left.”

On the human factor: Human beings are the most important part of any equation.
The human beings with whom we serve, and whom we serve at Vanguard, Bogle said.

On public fund companies: Matthew 6:24
How can corporations be fiduciaries to their shareholders and to their fundholders? Bogle got biblical, citing Matthew: No man can serve two masters, for either he will hate the one, and love the other; or else he will hold to the one, and despise the other. 

On improvements in the fund industry: “Keep working.” 
The industry has gotten somewhat better, Bogle said. “But for heaven’s sake…success is a journey, not a destination. Once you think you’re there, it’s not a good idea. Keep working.” 

Missed last month's Morningstar Investment Conference in London? Catch up on all the articles and video interviews here.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Jason Stipp  is Editor of Morningstar.com, the sister site of Morningstar.co.uk.

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