What Investing Icon Jack Bogle Gets Wrong about ETFs

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.
[Stock traders]

Bogle’s Bad Views on ETFs

John “Jack” Bogle is an icon in the investing industry. The founder of Vanguard and the “father” of index mutual fund investing has had a lot of good ideas over the years. Unfortunately, the ideas in his recent editorial in the Financial Times are not among those good ideas.

According to Mr. Bogle, exchange-traded funds (ETFs) are something that investors should “beware” of. As Bogle writes, “Mark me as a member of a small group of cohorts who are dubious about the utility of ETFs for long-term investors.” Bogle goes on to express some rather bad views about ETFs as merely a great “marketing innovation” where the “only sure winners are the brokers and dealers of Wall Street.”

At the crux of Bogle’s criticism is that ETFs are too tradable, and that the ability to buy and sell ETFs so easily, and at any time of the day, makes them too tempting for investors to do the wrong thing by being too active with their money.

Now, let’s put aside the obvious paternalistic patronizing going on here, which basically insults your intelligence as someone able to make your own decisions. Rather, Bogle assumes that the only proper way to invest is to buy and hold for the very long term. Well, not all investors do that with their money, and I don’t think investors should do this.

Now, I’m admittedly biased here, as I have been employing a trend-following strategy for nearly four decades that’s kept subscribers out of bad bear markets and in roaring bull markets. But still, to criticize the tradability feature of ETFs seems akin to criticizing having too many choices as a consumer.

Bogle also criticizes the turnover in ETFs, claiming some funds have turnover rates of 2,000% to 4,000%. What Bogle fails to mention here is that turnover in ETFs doesn’t affect the holdings the way it does with a traditional mutual fund. Because ETFs are tied to an index, the buying and selling each day still results in the same holdings for the investor. This isn’t the case with mutual funds, which are most often not tied to any specific index.

Finally, I think the biggest disappointment here when it comes to Bogle’s views is that they are dismissive of the innovation and progress in the investment world. When Bogle and Vanguard started the first index mutual fund in 1975, it represented a great innovation.

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Now, every month new ETFs are coming to the market that are low cost, easy to trade and easy for investors to get access to markets where they never really could before. Rather than lauding this innovation as a positive, Bogle opts to take the Luddite route and tries to put it down as unfit for investors.

My response to this can be summed up by the great Victor Hugo, who wrote, “Nothing is more powerful than an idea whose time has come.”

71% of Annuity Owners Are Doing It Wrong!

Every year, I urge readers of this e-letter, my newsletter Successful ETF Investing and also listeners of my podcast to review their annuities. An annuity can be a valuable income tool, but it also can be an underperforming asset in your portfolio.

If you currently own an annuity, I urge you to consider it carefully. It could mean hundreds of thousands of dollars to you over the next couple of years.

According to industry sources, 71% of annuity holders are not using that investment’s single-biggest retirement benefit. And I’m not talking about tax deferral… but something much more powerful.

It is the ability to use your annuity to create a never-ending income stream… one that funds your retirement and lasts for as long as you live.

The funny thing is that this benefit is no big secret. Every annuity contract has this potential to pay out income.

So why haven’t 71% of annuity owners taken advantage of this opportunity? Here are the most common reasons:

  • They didn’t need an income stream at the time and simply forgot about the benefit…
  • They bought the annuity 20-30 years ago and can’t get in touch with the seller…
  • They’ve heard so much misinformation about annuities, they’re afraid to make a move…
  • They simply don’t know about the income benefits available…

Even so, it’s still astounding to me that 71% of annuity holders aren’t taking advantage of the chance to receive hundreds of thousands — if not millions — of dollars in income over the course of their lives.

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I’d like to show you how to do exactly that: Transform your annuity into a never-ending income stream…

And I’d like to do it FREE OF CHARGE!

At Fabian Wealth Strategies, we currently are offering a FREE annuity check-up designed to make sure you are getting the most out of your annuity. During this process, we will analyze your annuity and compare it with dozens of other annuities available in the market to make sure your investment is still aligned with your retirement goals and objectives.

To take advantage of this special offer, simply call us at Fabian Wealth Strategies toll free at (800) 391.1118 or CLICK HERE. When you call, we’ll schedule you for a FREE annuity consultation as soon as possible.

Don’t wait a minute longer. Contact us today so that we can help make sure you aren’t one of the 71% of annuity holders missing out on big money.

NOTE: Fabian Wealth Strategies is a Securities and Exchange Commission-registered investment adviser, and is not affiliated with Eagle Financial Publications.

Wisdom, Lemmy Style

“Apparently people don’t like the truth, but I do like it; I like it because it upsets a lot of people. If you show them enough times that their arguments are bulls***, then maybe just once, one of them will say, ‘Oh! Wait a minute — I was wrong.’ I live for that happening.”

— Lemmy Kilmister, Motorhead

The iconic rock musician is known for speaking his mind, and here he reminds us that while truth often upsets — it also can set you free.

Wisdom about money, investing and life can be found anywhere. If you have a good quote you’d like me to share with your fellow Weekly ETF Report readers, send it to me, along with any comments, questions and suggestions you have about my audio podcast, newsletters, seminars or anything else. Ask Doug.

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In case you missed it, I encourage you to read my e-letter column from last week about what China’s bullish move means for global markets. I also invite you to comment in the space provided below.

Upcoming Appearance

I invite you to join me at the MoneyShow Las Vegas, May 12-14, 2015. With stock picking taking on renewed importance as the market shows signs of volatility, this event offers an opportunity to hear from a number of experts, including my Eagle Financial Publications colleagues Mark Skousen, Chris Versace and Bryan Perry.

Be a guest of Eagle Financial Publications and register for FREE by using priority code 038656 and calling 800-970-4355 (toll free in the United States and Canada) or signing up online.

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Just as the economy was recovering from the Great Depression in the 1930s, suddenly industrial production fell by 32%, unemployment rose to 20% and the stock market fell in half.

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