Jack Bogle’s Personal Investment Portfolio

While poking around doing research on municipal bond funds, I ran across this 2010 Marketwatch article about the personal portfolio of Jack Bogle, founder of Vanguard.

The 81-year-old Bogle said that for his personal portfolio he follows an age-based formula. The founder of the Vanguard Group has 81% of his personal assets, including his retirement plan, in bonds and 19% in stocks. [...] “I’ve always had in the back of my mind this incredibly simplistic idea, that your bond position should have something to do with your age,” he said.

[...] In his retirement portfolio today, he’s got two-thirds of his bond portfolio in the Vanguard Total Bond Index fund and one-third in the Short-Term Investment Grade bond fund. In his personal portfolio, Bogle’s got two-thirds of his bond portfolio in the Vanguard Intermediate-Term Tax-Exempt bond fund and one-third in the Vanguard Limited-Term Tax-Exempt bond fund.

Now, you have to remember that Bogle is 81 and even though he didn’t take the Goldman Sachs private yacht route, it’s safe to say he doesn’t worry about wringing every last penny out of his investment returns. Of course, I don’t think he’d want to own something that would tank in price, either. I’m sure he thinks of his portfolio as more of a lesson to other investors than anything else. As such, here are my takeaways:

Age in bonds. Bogle said age in bonds, not bet the house on bonds as the article seems to suggest. If you’re 25, that’s just 25% in bonds which provide some needed stability to your portfolio. Look at 2011 year-end returns as just one example. At age 65, that’s 65% in bonds. Even if you think the stock market is going to outperform bonds, do you really want to expose yourself to 70% or 80% stocks in retirement? Even if you don’t follow this rule exactly, it can serve as a rough guide.

(As for the 19% stocks, you can reference this older 2006 Morningstar article where he lists the Vanguard Total Stock Market Index fund as well as some active holdings in Wellington, Wellesley, Windsor, and Explorer. These are sentimental holdings – he was once Chairman of Wellington Management before founding Vanguard – which aren’t index funds but are still very low-cost.)

What kind of bonds? In tax-deferred accounts, he holds the Total Bond index fund (mix of Treasuries, GNMAs, corporates) and some short-term high-quality corporate bonds. In taxable accounts, he holds intermediate to short-term municipal bonds. The Vanguard muni bond funds are actively-managed to maintain diversification across states and counties, and all maintain relatively high credit ratings. I currently hold the same muni bond funds (limited and intermediate). I also own TIPS, which is not mentioned in this article but was in his portfolio as of 2006.

Now, he is obviously pro-Vanguard but an important thing with bonds is low-cost. With Treasuries and TIPS, the credit risk is all the same so you could technically buy them directly yourself. Otherwise, low-cost funds and ETFs are the only thing I hold. Bogle also doesn’t extend his average bond duration very long in any case, which protects you somewhat in the event of rising interest rates. I also gather from this that he does not fear widespread defaults in the muni bond arena. I don’t know where Bogle lives (I think Pennsylvania) but he chooses not to use any state-specific muni bond funds.

Comments

  1. anonymous says:

    I wonder why Vanguard’s Target Retirement Funds do not reflect Jack Bogle’s allocation? The funds have far less in bonds than the supposed age range of the funds.

  2. Should I decrease my allocations in stock mutual funds and put my investments in Inflation Protected Bonds and Intermediate Bonds?

  3. @anonymous – Bogle is the founder of Vanguard but is no longer their CEO. Check out this video on Bogle and Target date funds. The fact is that you can’t have one rule or one fund fit everyone – it’s just a useful tool to use.

    http://www.morningstar.com/cover/videocenter.aspx?id=301426

    @Roger – I have no idea, I don’t know the rest of your financial picture.

  4. Had I followed this advice, I’d probably have double the money in my retirement at this point with the stock like returns on bonds over the past decade. Unfortunately, I held 90-100% stocks for way too long in my 20s, the 120-your age rule. It took a hard lesson to learn that bonds can out perform stocks by a long shot. Just a few days ago I checked the 1 year on long term treasury index – 30% versus -0% for the S&P.

  5. Why is it always stocks:bonds? What about other asset classes like commodities and forex?

  6. Forex is a negative-sum game after the huge bid/ask spreads. The average individual investor can hardly expect to make positive long-term returns being a currency trader.

    Commodities can be a hedge in a portfolio, but almost by definition will track inflation in the long-term.

  7. You mention buying bonds directly. Where can I do this?

    I’d venture to guess it can’t be done at city hall :)

  8. I’m interested in buying municipal bonds. Can I do this only on the market or can I purchase these directly from the city or county?

  9. You can buy bonds at treasurydirect.gov. That is the official recommended place to purchase them directly from the government.

  10. Note: He’s is Rich and Has Other Sources for Funding His Retirement Income..
    1st Goal is Just Preservation- Defense
    2nd is Inflation
    3rd is Growth

    Only problem is? Less than How Many can afford such an Approach? How many have at least Twice as Much $ than a 4% apy from it , will fund their Retirement? Thus only need 2% apy..?

    Not many..

    He, like most others Don’t Target Market to the Average Investor and Saver, do they? I Don’t think so..

    A Simple VWINX/VWIAX Bal Fund is about the Least most of us Can afford .. That is, IF you believe that Owning Stocks Is The Only way to Fight Inflation and to Make The Most you Can..
    I Don’t.. Using Global and Emerging Market Bonds has been for me

  11. What if..
    The Vast majorty of us Private Investors , Owned ONLY BONDS?
    And Insisted Our Pension Plans Only Own BONDS?
    and Forced Them to provide Traditional Bond Interest? Like 5% for CD’s and 7% for Long Term Bonds..
    What would happen to WallSteet?
    What would happen to all those Thousands of Mutual Funds that Sell Stocks?
    Stocks are Designed to Support Whome?
    1. Corporations- so they and Do as they please with That $..
    2. And to Pay off Fund Co.’s and Brokers
    3, And Aren’t Stocks alot Less Regulated than Bonds?

    The Fed and Corp. America has been Trying for the past 5 yrs to Destroy Owning Bonds, but Wiser Investors Aren’t Taking the Bait are they?

    When They give up and Raise Rates? HOld your Course.. they will Drop in Nav for awhile, but they will Return.. Just Look at 99′ vs 2000.

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