Bogle: ‘Total’ Corporate Bond Fund Needed

April 15, 2013

A broad ‘total’ corporate bond fund would be a great way to help investors responsibly generate income in an era of ultra-low rates, John Bogle says.


John Bogle is, as most everyone knows, the very conscience of the investment industry. He’s also a gifted conversationalist, so all he has to say about everything from conflicts of interest in the fund industry to the problems with ETFs comes with a fluid, extemporaneous clarity of a man who at 83 is still very much on top of his game.

Apart from the diatribe against overly trading ETFs and funds that target absurdly slim slivers of the market, Bogle has been counseling investors in the past few years to find yield in corporate credits. He built on the that view when he told Managing Editor Olly Ludwig that investors could really use a broad “total corporate bond” index fund to help them find yield at a time when the government bond market increasingly seems to be a losing proposition. So what do you think the future holds? I ask that after what you said on CNBC a couple of weeks ago, mentioning the possibility of a large correction. Some blogger picked it up as you predicting some dismal future turn of events, which, in my experience speaking with you, seemed completely out of character.

Bogle: We have a pretty good idea of what stocks and bonds will do in the next decade. But there will be bumps along the way. I’m almost quoting what I said in the show. I said, “I’d be surprised if we didn’t have at least a 25 or 30 percent decline. And we could even have a 50 percent decline.” Of course we could, but that doesn’t mean we will! Does it bother you that your comments were taken so much out of context?

Bogle: I don’t worry about the basically nonauthoritative journalism that we get on these blogs. And some of them do a lot of work, and some of them are pretty good. But you have no way—that I know of—knowing who’s doing what. Honestly, there’s too much interest in gossip and things that don’t mean a darn thing to long-term investors, and not nearly enough focus on what the realities of investing are, which begins with investing forever—my favorite time horizon—and keeping costs at rock bottom, so that you get your fair share of market return. Can you comment on how you view the U.S. economy and the global economy in the aftermath of one of the worst downturns in the history of the American republic? The S&P 500 and the Dow Jones industrial average are hitting new record highs, but what are your views about how this healing process is unfolding?

Bogle: Well, this is obviously a very, very risky and challenging time for our fiscal authorities and our monetary authorities. And we have this fiscal irresponsibility on the part of our politicians, where statesmanship is not to be observed. Everybody must understand that monetary policy cannot bear the whole burden of getting us out of the fiscal mess we’re in. So does that imply higher taxes and more disciplined spending going forward?

Bogle: Yes, absolutely.


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