Friday, September 9, 2011

Skeptical Bogle

In a Fox Business interview back in May, John "Jack" Bogle made the following points:

- Odds are good stocks will beat bonds.
- Wall Street has changed...not for the better.
- It's a speculative culture.
- Investments are no longer the star of the show; they're now in a cameo role.

"...we've changed from a financial industry that was about stewardship for the small investor to it being all about marketing, selling and speculating. And that leads the average investor down the wrong path. 

What's important to note is that the stock market doesn't create value -- companies create value."

He says Mutual Funds, unfortunately, have joined the speculative game and, as a result, care a lot less about the corporate governance of the companies they own. Why care if you're just going to sell in days or weeks? That hurts the long-term business performance and, of course, ultimately stock performance.

"...investors don't have to play this game of speculation. That's why we have the index fund, which is an obvious idea, the idea of owning the entire stock market. Your investment is the intrinsic value of U.S. corporations -- that is where returns really get created."

Check out the full interview here.


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