Wednesday, January 19, 2011

Bogle on ETFs: Step Up The Stewardship

A couple excerpts from this interview of John Bogle by Morningstar. In the interview, Bogle says that while the ETF may be a great marketing idea it "remains to be seen" if it's a great investment idea. He added:

"The trading volumes are astonishing. Standard & Poor's 500 SPDR, the biggest one, turns over 10,000% a year, and I think 30% turnover is too high."

Bogle added that investors should buy and hold ETFs...not trade them. In the interview he also said that "we get captivated by our emotions" and "have a big behavioral problem in investing." More from the interview on stewardship:

"...we ought to try and have a better way of dealing with our trust, our stewardship of investor assets than pandering, if you will, to their baser instincts...gold is a good example...it's a complete speculation; it producers no income. It has no underlying intrinsic value; you buy it and then sell it to somebody for more than you paid for. And so we have more money flowing into gold and we advertise gold. And we were advertising performance in the go-go era.

This business really has an obligation to look to itself and say, 'Let's step up the management and the stewardship and step down the marketing and the salesmanship.'"

Here's a couple related posts: 
Check out the full interview.

Adam

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