John Bogle, the founder of Vanguard, recently conducted an extensive interview with a financial insider publication called Money Management Executive. In this no holds barred interview, Bogle shares his opinions and wisdom on index funds, ETF’s and alternative investments and how they are being used and marketed to the public.
When asked about the proliferation of index funds, with new ones popping up almost daily, Bogle in his usual no nonsense manner had this to say: “ I think it’s gone much too far. Most of them are not worth the powder to blow them to hell. I think there are 1,500 ETF’s in the U.S. It doesn’t work in the long-run. I can’t think of a worse way to invest. All that leverage doesn’t work over the long term."
“It’s 1,450 out of 1,500 ETF funds that I just wouldn’t touch because they’re not diversified enough. Or they have some huge speculative twist to them that if you can guess the markets right you will do very well for a day or two but who can do that? Nobody."
As a self-described ‘Boglehead’ and a long time believer in the value of low cost, well diversified index funds and the high integrity approach Vanguard offers, any opportunity to listen to or read Bogle ‘unplugged’ is just too good to pass up.
As the amount of investment choices continue to multiply daily and it becomes more difficult to separate hype from reality, refer back to this common sense article as often as is needed, tune out the noise, keep your investment costs low, create a well diversified portfolio, develop your financial plan and stick to it.