Here is a recent excerpt from an interview with John Bogle about whether mutual funds are a safe place for people to have their money…
John Bogle: “It is as safe as the stock market, which is to say — to be quite blunt about it — not safe on any short-term basis. But when you look at the long term, look to what investment can I own for a lifetime? We know — as much as we can ever know — that stocks will do better than bonds over half a century, let’s say.”
“If you’re in your 20’s and you’re going to be investing for the next 50 or 60 years, it’s an excellent long-term bet. [But] in any given year? The market can drop 50 percent. I’ve seen now three of those 50 percent drops. They’re all scary. At the bottom, you think they’re going to last forever. But they don’t.”
What is he saying? Is the stock market safe or not safe? What stocks or mutual funds are safer than others? I think that Mr. Bogle is a very smart businessman. So smart that he can say nothing while appearing to say something very insightful (to paraphrase: the stock market is safe as long as you have 50 to 60 years of investing ahead of you).
If the market can go down 50% in any given year (3 times in his lifetime), then how safe is it? Sure, if you are 20 or 30 then maybe you can ride it out or even take advantage of the lows. But if you are reading this, my guess is that you are somewhere north of 50.
Folks, if you depend on your retirement savings for income now or starting in the next 10 years, can you really afford to have a 50% drop in your account value? Smart investors understand that conservative investing using a balance of safe and low risk investments is the best way to secure their financial future. Combine this strategy with a focus on reducing or eliminating taxes and you have a winning combination.
I believe that this is common sense and so do our clients.
If you agree, please give me a call at 215-968-1755 or contact me by filling out the contact form on this site and I will get back to you.