Bogle: optimum returns come from staying the course
Jack Bogle says trying to time trades is a flawed decision, and investors should not try to beat the market.
Christine Benz: One thing we've heard some market commentators talking about is this value versus growth bifurcation that we've seen quite recently with growth stock outperforming. It doesn't sound like you think investors should try to get too cute in terms of repositioning their investment style exposure either.
John C. Bogle: Holding the market is the ultimate position, and the S&P is a good representation of that, the total stock market. Then you don't have to think about switching. Switching involves timing; should I do it today, should I do it tomorrow, should I wait for a year? Those decisions are just going to be flawed. You're going to be moved by your own emotions, maybe the emotions of the advisor that you have. Who really knows? But there's no evidence at all that trading back and forth enhances return, and all the evidence in the world is staying the course, for the want of a better word, is the course that will give you the optimum returns.
When you think about an investor's lifetime, and let's say you start investing when you're 25, and you will live, if you're 25 today, to 100, easy. It's kind of frightening. I'm not there yet, and I don't think I'm going to make it, but that's another story. That long period of 75 years, there's just no way that trading things, picking managers, moving money around, can possibly beat owning the entire market the entire period. Even forgetting taxes, even forgetting costs, forget everything. It's just all those things, looking back at performance and making a decision, simply don't work. The chances of beating the market for a young person today, 25-year-old today, is I would say less than 1%, and it may be less than 0% if that's possible.
Benz: Jack, I always consider sitting down with you one of the highlights of my year, so thank you so much for joining me here today.
Bogle: Always great to be with you, Christine. Good luck.
Benz: Thanks for watching. I'm Christine Benz for Morningstar.com