John Bogle is a champion of indexing, and founder and retired chief executive of U.S.-based fund giant Vanguard Group.
What advice would you give investors today?
Ignore the volatility of the stock market. Stocks have been fluctuating since the beginning of stocks, and they will continue to do so, maybe even more violently in the years ahead, given the mess that we have in our financial system. The value of stocks is not the prices in the stock market, but the amount of earnings and dividends of corporations around the world, particularly in America. The secret of making money is to own corporations that grow.
Where do you see the opportunities now?
I believe that stocks will do significantly better than bonds. U.S. stocks are now yielding about 2 per cent. Earnings could go to around 5 per cent. That would give you a 7 per cent nominal return on stocks over the next decade. I happen to be very optimistic about Canada, because it has many of the characteristics of the U.S. – strong capital markets and solid governments that are not going to be overthrown tomorrow.
How would you invest a $100,000 windfall?
My family accounts are about 50-50 in stocks and bonds. My personal account is about 80 per cent bonds and 20 per cent stocks – I'm 83 years old, for heaven's sake, so I want some money that is pretty safe. I happen to be totally in the U.S. market. Most intelligent people I know think I am crazy. But we earn money in dollars, we invest money in dollars, and we spend money in dollars. When you go outside the United States, you are taking a currency risk.
What was your worst investment?
When I came out into the world of investing, I naively went to a stockbroker and bought individual stocks. I finally decided that I did not like that game. I haven't held individual stocks in any significant way since I was 40 years old. It's time-consuming, tedious and unprofitable.
What keeps you awake at night?
Nothing. Just invest, and don't peek. Don't open your retirement plan contribution statements every quarter. Put in money regularly, and when you retire 40 or 50 years later, and open the statement for the first time, you run the high risk of heart failure – you'll be stunned at how much money you have accumulated.