Financial advisors tend to be a cynical, hard-bitten group. They strain to merely applaud and seem to be genetically incapable of wild adulation. So, it was surprising yesterday when our luncheon speaker was introduced. He was Jack Bogle, founder of the Vanguard funds. Even after 83 years of accomplishment, even he was surprised at the loud applause and standing ovation from 200 "know-it-alls" like myself. We were indeed in the presence of a rock-star!
Jack rose to fame arguing the danger of high fees. His Vanguard funds are among the cheapest in the industry, and I use them often. Indeed, it was his writings that lead me to exchange-traded funds, which are generally cheaper than mutual funds.
He also argued that nobody is consistently smarter than the market in picking stocks. He believes you should just buy an index fund that mimics the S&P 500, for example. There are almost 15 thousand stocks out there. Which do you study? Which do you not study? For example, if you assume that you even want to invest in drug stocks, how do you pick among the many drug companies worldwide? Do you think you can see something in the financial statements that others cannot also see? Do you think nobody talks with senior management?
Like Warren Buffett, he also believes the ideal holding period for an investment is forever. Buy it, hold it, and watch it rise over the long term. Like myself, he believes Monte Carlo analysis is a technology freak-show that misleads investors into thinking they are on-track to meet their financial goals.
His current campaign is to create a real fiduciary standard for financial advisors. As discussed here frequently, the majority of financial advisors are in life insurance or stock brokerage; both of which are mere salesmen and have no legal obligation to do what is right for the client, not even to fully disclose their fees.
Of course, no two people ever agree completely. I believe an investor should increase their cash levels (read: reduce risk) during periods of great risk, because whatever return is earned is not worth the risk assumed. I also believe an investor benefits from rotating among the various sectors of the economy, such as investing heavily in consumer staple stocks during recession and consumer discretionary during growth.
Still, I have the highest admiration for Jack Bogle and wish him many more years of both work and life!
Jack rose to fame arguing the danger of high fees. His Vanguard funds are among the cheapest in the industry, and I use them often. Indeed, it was his writings that lead me to exchange-traded funds, which are generally cheaper than mutual funds.
He also argued that nobody is consistently smarter than the market in picking stocks. He believes you should just buy an index fund that mimics the S&P 500, for example. There are almost 15 thousand stocks out there. Which do you study? Which do you not study? For example, if you assume that you even want to invest in drug stocks, how do you pick among the many drug companies worldwide? Do you think you can see something in the financial statements that others cannot also see? Do you think nobody talks with senior management?
Like Warren Buffett, he also believes the ideal holding period for an investment is forever. Buy it, hold it, and watch it rise over the long term. Like myself, he believes Monte Carlo analysis is a technology freak-show that misleads investors into thinking they are on-track to meet their financial goals.
His current campaign is to create a real fiduciary standard for financial advisors. As discussed here frequently, the majority of financial advisors are in life insurance or stock brokerage; both of which are mere salesmen and have no legal obligation to do what is right for the client, not even to fully disclose their fees.
Of course, no two people ever agree completely. I believe an investor should increase their cash levels (read: reduce risk) during periods of great risk, because whatever return is earned is not worth the risk assumed. I also believe an investor benefits from rotating among the various sectors of the economy, such as investing heavily in consumer staple stocks during recession and consumer discretionary during growth.
Still, I have the highest admiration for Jack Bogle and wish him many more years of both work and life!
