John Bogle: Stocks fully valued

John "Jack" Bogle, founder of passive investment giant Vanguard Group, feels pessimistic. Inequality, protectionism and America's apparent backing away from free trade and the North American Free Trade Agreement "is, in the long run, bad for our society, bad for our economy, and bad for our stockmarket". What's more, he thinks that stocks are "at least fully valued" at today's levels. "If we are lucky", investors will get annual returns of at most 4%-5% a year from stocks. If not, they could easily see the value of their investment fall in the short run.

Even so, Bogle still thinks the S&P 500 is the best stock index for investors to track. That's because "it's weighted by the market capitalisation of each stock, so if a big stock goes up in value, you don't have to buy any more, it goes up in value by the exact same amount in the fund".

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Despite his status as a passive champion, he's very critical of exchange-traded funds (ETFs), which allow investors to trade indices "all day long, in real time... clear statistical evidence has confirmed that the more investors trade, the more their returns fall short of the stockmarket". Indeed, he says, those who bought and held Vanguard's main index fund beat those who bought and traded in and out of the near-identical ETF "by around 1.6% a year".