John C. “Jack” Bogle always was a savvy consumer dressed as a corporate executive.
The founder of mutual-fund giant Vanguard Group took those sensibilities to the investing world when he addressed a fundamental consumer premise—getting the most bang for your buck. You do this by capturing the market’s return over the long term as inexpensively as possible, so costs don’t diminish investment returns significantly and the bulk of the profits flow to the investor.
“That’s me as a consumer,” Bogle says, noting that his consumer and business sides are “so closely aligned that I am not sure I am able to separate them.”
As a result, Bogle was the driving force behind the first index fund and has spent decades getting Americans to take control of their finances and improve returns by preaching low-cost, long-term, stay-the-course investing.
These days, Bogle isn’t a particularly active consumer. He can’t remember the last time that he shopped in a mall, although he believes that it was more than a decade ago, and he doesn’t do food shopping. Even with big-ticket items, Bogle says he focuses on keeping the shopping process simple—online and to a few select brands. “I have a life to live beyond shopping,” he says.
That simplicity dominates Bogle’s investor side. Although the mutual-fund industry now has thousands of products, Bogle sticks with the basics.
His portfolio is 53 percent in bonds, mostly intermediate- and short-term index funds, with some municipal-bond funds. The rest is in “plain vanilla” stock-index funds, “nothing exotic,” he says.
That ratio strays quite a bit from the formula that Bogle is best-known for advocating when it comes to money management. He tells investors to subtract their age from 100. The result should be invested on a percentage basis in bonds, with the rest being in stocks.
By that rule, Bogle, who is in his mid-80s, should have at least 85 percent of his portfolio in bonds. He makes no apologies.
The rule is just a starting point to think through where consumers are, Bogle says. “It was never intended to be, ‘Oh my God, you are 80, but you are only 78.9 percent in bonds.’” He says investors should factor Social Security into their allocation, treating it as though it were a bond.
An investor’s ratio depends on what he/she wants to accomplish, the amount of resources and his/her fear factor, Bogle says. “The age-based thing is a starting point and not a finishing point. You have to test it on the anvil of common sense.”