Bogle: Stock Market Just a Distraction to Serious Investors

Sunday, 23 Dec 2012 05:48 PM

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The one venue to where investors flock has become a major distraction to investing in itself — the stock market, said John Bogle, founder of The Vanguard Group.

Too many investors are playing the stock market and buying and selling over the worries of the moment instead of buying vehicles such as index funds and letting them grow and produce returns for investors over the long term, said Bogle, according to the Wall Street Journal.

"The stock market is a giant distraction from the business of investing," said Bogle.

"People look at investing more or less as trading stocks or mutual funds or God forbid ETFs, and that has nothing to do with investing," Bogle added.

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.

Markets have been poised to roil as the end of the year approaches with no deal struck in Congress yet over how to avoid the fiscal cliff, a set of sweeping tax hikes and deep spending cuts due to take effect at the same time in early January.

Failure to steer the country away from the fiscal cliff could tip the country into a recession next year, according to the nonpartisan Congressional Budget Office.

Bogle said recently investors need to look beyond the warning flags and headlines signaling the arrival of the fiscal cliff and buy and hold, as U.S. markets will perform well over the longer term.

"If you can discipline yourself as an investor, don't pay a lot of attention to the short-term noise, and focus on the long term," Bogle told CNBC recently.

Buying and selling stocks in an effort to beat the market exposes investors to fees and commissions that eat into returns anyway.

"I'd say own the entire U.S. stock market, or if you wish, with some seasoning from the emerging markets or the developed markets of the world. Own the market, if you will," Bogle said.

"Because that way you know you will capture almost all the market's return. You will not capture the market's return if you trade with one another because of that hump taken out of your capital by Wall Street."

Investors are still hoping lawmakers and the White House agree on fiscal reforms needed to avoid the year-end cliff.

Republicans in the U.S. House of Representatives canceled plans to vote on a budget proposal put forth by Speaker John Boehner, himself a Republican, that called for tax hikes on incomes over $1 million, well above a White House plan that would hike taxes on incomes topping $400,000.

The impasse stoked fears Jan. 1 will come and go without a deal, which could spook investors even though spending cuts and income tax hikes will take a while to take effect.

However, other investment professionals say failure to strike a deal won't herald the arrival of economic Armageddon on Jan. 2.

"History has shown that the economy is going to do what the economy is going to do," says Scott Carmack, co-portfolio manager at Leader Capital in Portland, Ore., according to the Associated Press.

"And politics don't create some sort of disaster."

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.

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