Bogle Talks Stocks, Munis, and The Fed

In a wide-ranging recent interview with Fox Business News, Vanguard founder John Bogle says it’s reasonable to expect stocks to return about 7% to 8% per year in this decade, and stresses that investors should avoid the temptation to speculate in the stock market.

“Reasonable expectations are that we will have returns of 7-8% in this decade in equities, and that bonds will yield 3-4% in the same time period,” Bogle says. “The odds are very good that stocks will do twice as well as bonds.” But, he adds, no one knows for sure what will happen, so investors shouldn’t commit everything to stocks — especially older investors who should be looking to preserve capital rather than create wealth.

Bogle also says investors shouldn’t dump municipal bonds, despite the warnings of star analyst Meredith Whitney. “I think Meredith Whitney paints with too broad a brush and I think painting with that broad brush has tarnished that industry,” he says. “And I think if you get out of munis it’s at your peril because states and cities are taking measures not to default and these bonds offer great tax advantages.”

As for the Federal Reserve and its quantitative easing policies, Bogle is not a fan. “Stocks have a certain inherent value, and if you raise that value by printing money, they will eventually come down,” he says. “The government has no business getting into stock valuations. It’s a very slippery slope.”

Bogle also offers his take on the “disgraceful” behavior of hedge funds, problems with bond rating agencies, and whether exchange-traded funds are a good option for investors.