Saturday, April 08, 2006

Jack Bogle's Portfolio


Most all of you who read personal finance blogs undoubtedly know Jack Bogle, the founder of Vanguard and champion of index funds. Well, I was very interested to read what HIS portfolio is currently comprised of (see link); mostly to see if he practices what he so eloquently argues for in many of his books. For the most part, he seems to be consistent with his beliefs...he has mostly (but not all) index funds, he has the majority of his portfolio invested in Vanguard funds (at least that's what he discloses), and he practices and assett allocation strategy.... for the most part.

However, there are some aspects of his portfolio that are a result of market-timing or perhaps more accurately, following the momentum of the market that surprised me. For example, the article states that in July 2004, his portfolio was 35% stock/65% bond whereas now, his portfolio is 65% stock/35% bond. Was this intentional? Yes... in that he allowed his portfolio to drift towards this allocation that resulted from the strong performance of equities over the last 3 years. Strictly speaking, if he followed his own advice, he would rebalance his portfolio based on his risk tolerance, time to retirement, etc... rather than allow the market to dicate his assett allocation. And if his assett allocation was 35%/65% in 2004, then the subsequent increase in stock allocation should be a result of a change in his risk tolerance or desire for increased returns at the expense of higher risk, or longer-horizon until retirement rather than a passive result of market performance.

I still respect the man and believe that his book "Common Sense on Mutual Funds" should be read by anyone that has a 401k plan. Overall, I am at least happy to see that he puts his money in Vanguard (I just wish Vanguard funds disclosed how much of the fund is owned by the manager of their funds!)
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