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Bogle on Election, Dollar-Cost Averaging

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    The Vanguard Group founder Jack Bogle gives his outlook for the markets.

  • Duration 5:42
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Perspective I just quickly looked out and look to the volatility index the -- dropping by about 5% some fear coming out of this market.

Who knows exactly why but perhaps once again we know one thing the market hates uncertainty.

They don't pick winners and losers in certain regards emotionally they just say look as long there's an idea.

A landscape that's a little bit clearer they tend to like that so we're looking at a pretty decent rally here as we talk about that what does it mean for -- -- After the election assuming there's a clear winner.

Because it just don't know after bush gore remember that let's bring in Jack Bogle he is the Vanguard Group founder.

And the father of index fund investing he's seen an election or two that's been pretty dramatic thanks for being here at a business network explicit -- to see Jack.

My pleasure -- Jack O'Connell laughing because were asking here what happens to tomorrow.

But there was a similar very big rally in the three weeks after Ronald Reagan was elected in 1980 but -- the markets gave -- -- back from a bit I guess because the country's problems don't magically disappear in a couple of weeks.

Well ailing -- thing about that is what -- would seems to me the market is saying today on who.

Who knows less about that and I did -- -- there for the long run right but all these resistance levels -- kind of thing don't really mean much to -- But I saw the latest polls morning from Nate Silver of the guru poll gurus.

And writes for the New York Times and he he has raised his chances of an Obama made victory.

The 97%.

That's awfully close to a hundred.

To a must be something in this rally of people saying Obama's gonna win and that's going to be good and why they would say that.

Is beyond me because the market depends not only on the expectations.

-- investors from the realities of the best thing which is power corporation's gonna do over a long period of time not tomorrow the next -- In terms of their dividend yields and earnings growth that's basically what -- market returns in the long run.

So in essence your saying that when we ask how do you think election results will impact the markets it's really really tough to say because after while we go back to things like earnings expectations and problems in Europe and other global issues to that sprinkle their their color through -- how are markets.

Yeah -- that's that's quite correct but in the long run all -- -- motion that goes up and that and all that expectations market amounts to nothing.

North of the very long run the returns on stocks -- determined by the performance of companies.

And today with a dividend yield of around 2% two point 1% fits today's yield.

Alan stock.

And of the low likelihood that article growing about the rate of our GDP.

You've heard me say this before a list.

Which is probably going to be around 5% in nominal terms.

We should be looking ahead to about a 7%.

Market returns stock market returns I don't think emotions will carry at all much or carry it down much in the form higher lower.

-- peace.

So that's what counts economic performance of our corporation.

And that's not gonna change tonight it's not gonna change tomorrow.

But the market's expectations will jump up and then.

There will be hope and fear a disappointment agreed right right which we've always had.

A perfect but over -- -- love having you want because it being as voice of reason you talk about -- the long term investor but.

A lot -- was made -- you know you can you can really relate to -- a -- was made.

About the fact that people who have invested -- now it would be thirteen years ago and then the financial crisis.

Just wiped out returns and people were dead even with the money that they -- had ten years ago.

As as you've always said.

By -- dollar cost averaging pouring in money once a month in -- in essence index funds or or a little bit of everything.

But vanguard researchers in July came out with this paper I want to hold that up because it's entitled dollar cost averaging.

Just means taking risk later and it.

Compares dollar cost averaging -- monthly portions of the same amount every time buying stocks to putting the whole lump sum in this report.

It's so popular people are downloading it printing it it was on MarketWatch yesterday our sister and our sister site and I just don't know.

What do you make of this research report that says you credit don't win out when you dollar cost average.

Well of course you don't you average out -- -- you can bet a 100% of your money today.

And the odds are very round numbers 50% that you'll be right 50% should be wrong what you -- -- do is eliminate.

That those extreme probability can get to -- -- long term know reduced risk by investing.

A large number of different points in time.

So whether whether a dollar cost averaging and these are all based on past -- anyway is the best strategy I don't know what I think probably an awful lot of your.

Viewers our people have.

Substantial amounts of money right now or whatever money they have they're not going to be able ahead to them so they are as of this day forward while some investors.

And so the idea would be to make sure your protected against the unexpected problem.

And that means some months -- along with -- your stock.

And that in turn.

Points out that -- last twelve years.

The average balance fund with bonds stocks say 60%.

As stocks 40% bonds has generated a return of give or take around 6% a year that's not bad for twelve years but doubled your money well.

And and -- the heavy lifting you just at 7% in the next year or so will be watching for that.

Jack can you stick with us -- -- -- we're gonna take a break and then get your thoughts specifically on where to put money what you believe in what you think is is a flash in the pan so to speak.

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