“I don’t feel super confident in the stock market. By any historical standards, it’s pretty fully valued,” the 87-year-old founder of Vanguard told CNNMoney in a phone call.
Bogle isn’t calling it a bubble yet, but he think stocks are clearly expensive. His view is in stark contrast to another famous investor, Warren Buffett, who recently dubbed the market “cheap.”
Bogle says: “I don’t think it’s a bubble. I think it’s a significant high valuation, but not a bubble.”
He warns that returns in the next decade are likely to be very disappointing (think under 5% a year, instead of the 10% a year historical average).
Still, Bogle doesn’t advise pulling your money out. It’s too difficult to time the market. History has shown those who stay in, win. His own portfolio remains 50% in stocks (Vanguard funds, of course) and 50% in bonds.
Bogle’s concerns about Trump
Last month, Buffett called Bogle a “hero” of the investing world. But Bogle thinks about a lot more than stocks. These days, he’s warning that some of Trump’s policies are “bad for society” — and the economy.
Bogle disagrees with Trump on restricting trade and immigration, and he is alarmed by the hate crimes and growing inequality in America.
“We’re all children of immigrants. Open immigration is good for the economy,” he says. “I don’t mean just open the doors and let floodgates in. I do think discipline is required, but I don’t think it should be based on religion.”
He’s calling on politicians to do something about inequality. His own life’s mission has been to help “Wall Street get less, and Main Street get more.”
Below are key takeaways from the Bogle interview. Read the full interivew herefor more insights.Vanguard is now the second-largest investment manager in the world (behind only BlackRock). It manages $ 3.5 trillion worth of people’s money.
Bogle’s take on the world
On how to invest: “Own American business and hold them forever at the lowest cost you can possibly hold at. It’s an extraordinarily simple strategy and the mathematics are enduring.”
On growth: “The economy will have difficulty growing more than 2.5% this year.” (Trump has promised 4% growth).
On daily market moves: “I couldn’t care less about what the market did today. If you’re a long-term investor, your one big bet is that GDP will be significantly larger in 2027 than it is today. And that’s that.”
On stock prices: “I use a price- earnings (PE) multiple — a good indicator of value, although it’s not perfect. I get it up to 26x earnings. That’s way on the high side. Long run, the norm is more like 16x earnings or 17x earnings.”
On inequality: “Anything that increases the gap between rich and poor is bad for our society. It’s bad for our society and bad for our economy and stock market.”
On trade: “Anything that puts impediments to free international trade is also bad for our society and bad for our economy.”
On being called a “hero”: “I don’t consider myself a hero, but maybe, just maybe, it may take a hero [like Buffett] to know a hero. The remark has gotten a lot of attention. Nobody has written me to say I’m a jerk.”
On Social Security: “I’m convinced Social Security has been — and will continue to be — a good investment.”
On investing in index funds: “Indexing is not Marxism again, as some claim. If you’re on Wall Street, you don’t like the idea of indexing. But when grandma comes to you and says, “You’re a stock broker, what do I do with my money?: You say: Put it in an index fund.”
On why he only invests in U.S. stocks and bonds: “I’m a great believer in the U.S. Since 1993, the S&P 500 has gone up about 800%. The MSCI EAFE index of international stocks has gone up around 280%. I’m in no position to say whether the same thing will happen in the future or not. But I don’t mind betting on U.S. Half of revenues and profits of U.S. companies come from abroad anyway. I’m not some island of ‘American first’ at all.”
On the BIG risks: “If there’s a nuclear war, it won’t matter whether you own stocks or bonds.”