John Bogle Critical Of Some ETF Returns (SPY, VTI, BND, VIG, VWO, VEU)
John Bogle, founder and former CEO of Vanguard, believes that ETFs may be one of the greatest marketing tools of the 21st century, but, perhaps, not the best investing tool. In a recent CNBC interview John stated that Vanguard tracked the returns on 175 ETFs recently, and found investors fell about six percent short per year of the actual index. John did not specify what ETFs were tracked, or how they decided those ETFs over the other 1000 plus funds. He did note that the funds tracked needed to be around for for five plus years.
John did note that he does like some total market ETFs. Specifically mentioned was the S&P 500 Index (NYSE:SPX) which he even complimented stating, “There probably aren’t many investments that are better.”
ETFs mentioned: Vanguard Total Stock Market ETF (NYSE:VTI), Vanguard Total Bond Market ETF (NYSE:BND), Vanguard Dividend Appreciation ETF (NYSE:VIG), Vanguard Emerging Markets Stock ETF (NYSE:VWO), Vanguard FTSE All-World ex-US ETF (VEU).
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See the full CNBC interview below:
It’s not just the headline. The article makes it sound like Bogle is suggesting that a number of ETFs under-performed their benchmarks by an average of 6%. What he actually seemed to say was that investors who actively traded those ETFs earned 6% less on average than they would have through a passive buy-and-hold strategy in the same ETFs.
Once again, a deceptive headline to get attention while the actual video tells a different story. Yes, just like stocks ETF can be bought and sold throughout the day… so why is it Bogle is “critical” of them? Because day traders are abusing them. His point is buy and hold is the better strategy – and low cost ETFs just like other tools have proven to offer better returns for investors vs. traders. Actually LISTEN to the video and the point is just the opposite of this poorly written headline.