Why Jack Bogle Doesn't Like ETFs
Investing is a complex and important task, and as such, it's no surprise that there are a variety of different investment options available to consumers. Among these options are exchange-traded funds (ETFs), which are baskets of stocks that trade on the stock market like any other security. While ETFs can be a useful way for investors to get exposure to a variety of different types of stocks, Jack Bogle - one of the most successful investors in history - doesn't think they're all that great. In this article, we'll learn why Bogle believes ETFs are a bad idea for most people, and why you should probably avoid them if you're looking to invest in the stock market.
Background
Jack Bogle, founder of The Vanguard Group, is a well-known advocate against ETFs. ETFs are investment products that track indexes, such as the S&P 500. Bogle believes that ETFs are a risky way to invest and are not as diversified as traditional stocks and bonds. He also argues that ETFs do not give investors the same level of transparency as traditional stocks and can be difficult to understand.
Jack Bogle's Views on ETFs
It's no secret that Jack Bogle doesn't like ETFs. The Vanguard founder and CEO has long been a proponent of index funds, which he believes offer superior returns to ETFs. In a recent interview with Bloomberg, Bogle said: "ETFs are cheap money-making machines. They are not a substitute for individual investment in equity securities." He also said that Vanguard will continue to solely invest in index funds.
Why He Doesn't Like ETFs
When it comes to investing, Jack Bogle is a traditionalist. He believes that the only way to achieve long-term success is through investing in stocks and bonds.
One of the main criticisms of ETFs is that they are not like stocks and bonds. ETFs are baskets of different securities that are traded on exchanges just like stocks, but the investor does not own any individual security in the ETF. Instead, they simply hold an ownership stake in the ETF itself.
Bogle believes that this removes some of the risk associated with investing in stocks and bonds. In theory, this should make ETFs more stable and predictable than individual stocks and bonds. However, there have been times when ETFs have gone down in value even when the overall stock market has been doing well.
Another criticism of ETFs is that they increase volatility. This means that a small change in the price of one of the underlying securities can cause a big change in the value of your entire investment. For example, if Apple stock prices go up 10% one day, an ETF that tracks Apple shares might also go up 10%. However, if Apple stock prices go down 10% the next day,
Conclusion
It's no secret that Jack Bogle, the founder of Vanguard Group and one of the most influential investors in history, is a big fan of index funds. And it's not just because they're low-cost; index funds have also outperformed all other investment vehicles over the long term. In fact, according to research by Morningstar, nearly two-thirds (64%) of all global stock market returns since 1926 have come from indexes.
So why doesn't Bogle like ETFs? It has to do with what he believes are their biggest flaws: They're extremely volatile and tend to be dominated by a few select stocks. As a result, when those stocks perform well (which they inevitably will), investors who hold ETFs will see outsized gains while those who don't will suffer major losses. This makes them very risky for long-term investing goals.