Tips from Vanguard founder Jack Bogle

The stock market has risen sharply since President Donald Trump’s election win in November, but can those returns continue?

“These are hazardous times. These are not cheap times. In the market, one never knows what is coming next,”said Jack Bogle, founder of The Vanguard Group.

“The first thing they should do is plan for the future on the assumption that returns will be much lower than they have been in the past,” Bogle advised.

He said since the long bull market began in 1982, investors have seen a nominal average return of 12 percent, minus a 4 percent inflation rate, for an 8 percent real return.

Today, Bogle says “we’re looking for a 4 percent nominal return and one and a half to 2 percent inflation, for a 1.5 to percent real return on your savings. That’s a big, big difference.”

Despite the prediction of a lower return on the horizon, Bogle stressed: “There is never an argument for not investing.”

He advised a 50-50 blend of stock and bonds for “all investors of all types.” But he argued that if you’re younger, an allocation of 80 percent stocks and 20 percent bonds might be a reasonable mix. And “when you’re older, depending on circumstances, 40 percent or 30 percent in stocks and 70 percent in bonds. “

“I happen to be in the middle of that,” Bogle told, adding “I’m at 50-50.”

The investor has another rule, “when you get your retirement plan statement every month, don’t open it. Don’t peek. When you retire, open the statement and believe me if you’ve been putting money in there for 40 or 50 years, you’ll need a cardiologist standing by you when you open it.”

Source: Bloomberg

Trader Bozhidar Arabadzhiev