Vanguard Chief: Forget trading, start investing

Jack Bogle, founder of the Vanguard Group and author of “The Clash of the Cultures: Investment Versus Speculation,” says that investors should not be shaken by the economy, the election or the fiscal cliff and should, instead, stay focused on buying good businesses for the long haul, regardless of market conditions.

“Get out of the casino, own Corporate America and hold it forever,” Bogle said during “The Big Interview” on MoneyLife with Chuck Jaffe. “No trading, no nothing. You don’t need to trade; you don’t need to worry about the market. To protect yourself from the bumps the stock market will scare you with – even though it shouldn’t scare you because there have been bumps in the market since the beginning of time – have a bond position to go along with your stock position, and have your bond position [the proportion of your assets in bonds]  … have something to do with your age.”

Bogle said that the financial-services industry gets much of the blame for creating the idea that there are ways to beat the market or to avoid the bumps – or even the major market meltdowns – but noted that individual investors share the blame.

Bogle pointed out that the distinction between investment and speculation is more clear than most investors expect, and said that many people who consider themselves investors but act like speculators. He noted that both sides have elements of buying-and-holding securities.

“The stock market is a mysterious and often misleading thing. It creates no value, zero value, for investors. In fact … it shifts value from investors to participants in the system, brokers, investment bankers, money managers and things like that,” Bogle said. “Value is created not by stock prices, but by stock intrinsic values, by corporations that have staggering amounts of capital … they put that money to work, they earn a return on it in a competitive world. … That’s what investing is about, owning companies.

Source:   Chuck Jaffe, Moneywatch

 The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

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