Tags: Bogle | stocks | bonds | return

Bogle Sees 7% Returns on Stocks, 2% on Bonds

Thursday, 25 Oct 2012 11:20 AM

By Dan Weil

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John Bogle, the legendary founder of Vanguard Group, doesn’t have high hopes ahead for financial markets.

He predicts 7 percent annual returns for stocks and 5 percent for bonds — before inflation. With his forecast for 2.5 percent inflation, that translates into real returns of only 4.5 percent for stocks and zero for bonds.

“These are the most difficult investment conditions I've ever seen,” Bogle tells Morningstar.com.

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

He didn’t elaborate, but presumably he’s referring to the global economic slowdown that many experts believe will continue for several years and the massive deleveraging occurring in the United States.

So what should investors do to maximize their returns? Bogle doesn’t like the idea of taking on much more risk.

But one low-risk move you can make is switching to high-grade corporate bonds from Treasurys. That would increase your yield to a range of 2.5 to 3 percent from one of 1.5 to 2 percent.

In addition, you might extend your bond maturities. “Maybe take a little more maturity risk, which is not credit risk, just volatility risk,” Bogle says.

Other experts recommend blue-chip dividend stocks as a low-risk strategy to boost returns.

MarketWatch columnist Meena Krishnamsetty cites five stocks that offer attractive dividend yields, haven’t fallen in price this year and have seen at least one significant insider purchase.

The list includes Old Republic International, AT&T, Integrys Energy Group, DTE Energy and Alliant Energy.

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

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