A Sense of Optimism in the Air

Posted on 02. Dec, 2008 by Kyle Waller

Jack Bogle, Founder of Vanguard and creator of the first S&P 500 index fund has lived through 10 bear markets.  He talked to the Associated Press about his thoughts.

Bogle says now is the time to bet on a long term market recovery and now individual stocks.  He thinks it will take 1 to 2 and 1/2 years before the economy recovers.

He’s a quote of some advice Bogle gives that needs to be quoted,

I think investments you continue to hold through this decline will give you a return better than you can find in other places. And that is a crucial part of this analysis. We know what bond returns will be in the next 10 years – roughly 5 percent for long-term government bonds or about 4 percent for short- to intermediate-term bonds. So if stocks produce 6 percent, while you endured the volatility, you increased your total return.

Money-market funds are now yielding less than 2 percent – call it about 1.5 percent. That doesn’t look anything like 6 to 9 percent for stocks, especially when you compound them over a decade. I would not flee the market now.

Bogle is still very positive about the stock market, at the age of 79, bogle says he is 80% allocated into bonds and advices to allocate to bonds the age you are currently at.

Read the full article Here.