John Bogle's Bear Market Advice

John (Jack) Bogle, Vanguard Founder and author of Common Sense on Mutual Funds, was on CNBC recently to give his advice to investors.

Jack's 7/14/08 advice on what to do in this 2007-2008 bear market:

"Get your balance right. Have a certain amount in bond funds, bond index funds or Pimco funds for that matter because Paul (McCulley, PICMCO managing director) has done a fabulous job out there. Paul and Bill (Gross, PIMCO Founder and director). Take your equity position and make it 80% say US, 20% non US. Get your balance having something to do with your age. More bonds as you get older like I am and stay the course. "

Sounds just like my "core and explore" advice! Don't try to time the market and use asset allocation.

John Bogle, a regular guest on Moneytalk, and most other experts say they have never met anyone who can time the stock market.

The idea that a bell rings to signal when investors should get into or out of the stock market is simply not credible. After nearly fifty years in this business, I do not know of anybody who has done it successfully and consistently. I don't even know anybody who knows anybody who has done it successfully and consistently. Yet market timing appears to be increasingly embraced by mutual fund investors and the professional managers of fund portfolios alike.
[John C. Bogle in Common Sense on Mutual Funds: , pg 20]

But John does approve of explore portfolios and has said he has one himself where he invests in managed funds at Vanguard. Bogle on Managed Mutual Funds:

“Actively managed mutual funds? Yes. But only if they are run by managers who own their own firms, who follow distinctive philosophies, and who invest for the long term, without benchmark hugging. (Don't be disappointed if the managed fund loses to the index fund in at least one year of every three!)"
[John C. Bogle in “The Little Book of Common Sense Investing”, Chapter 18]

I've read and watched Jack Bogle over the years and his advice is quite similar to mine. He just says it differently. I believe most investors should place 80 to 95% of their assets into a globally diversified basket of index funds I call my "core portfolio" that is allocated between stocks and bonds based on your age. Then you try to beat the return of the core portfolio over the long term with the remaining 5% to 20% that you invest in managed mutual funds or manage an "explore portfolio" yourself to see if you have what it takes to beat the markets.

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