John (Jack) Bogle is both the founder of the low-cost mutual fund company Vanguard and the creator of the first index fund available to the public. These days he spends his time speaking about corporate ethics and how index funds are great investments for the vast majority of people. But what does he invest in?
According to this Morningstar article An Inside Look at Jack Bogle’s Portfolio, the answers may surprise you.
Overall Asset Allocation?
“My current asset allocation overall is about 60% bonds and 40% stocks. There’s a fair amount of money involved here, and I feel no need whatsoever to overdo equities. After all, if stocks (surprisingly) soar–I’ll do just fine, not in percentage terms but in dollar terms.”
Stocks – Active or Passive? Value or Growth?
The article is a bit cryptic, but by how I interpret it he seems to be split down the middle:
50% Passive – Total Market Index Funds
50% Active – Vanguard Explorer, Wellington, Wellesley Income, and Windsor Funds
So Jack tilts his portfolio to the value side of the style box. That style tends to be more conservative and puts more emphasis on stocks paying dividends.
Bonds
The bonds portion seems to be conservatively invested in 50% Short-Term Bonds and 50% Intermediate-Term Bonds.
Last time we talked to Jack, he had shifted away from long-term bonds and GNMAs. This time, we see that Jack is moving into TIPS (Treasury Inflation Protected Securities). “In fact, the only investment change I’ve made in the past few years is a move of about 6% of combined assets from Vanguard Intermediate-Term Bond Index VBILX to Vanguard Inflation-Protected Securities VAIPX . The latter is essentially a similar index fund, but with a possible advantage if inflation heats up more than the present discount suggests. I probably should have added to my holdings in the inflation-protected fund earlier.”
Even though this article isn’t the reason, I am starting to rethink my bond allocation to add exposure to inflation-indexed bonds. This would provide an additional hedge against some unexpected inflation.
Before anyone uses his portfolio as a model, consider the following:
- He’s 78 years old (76 at the time of this article), and even though he had a heart transplant, is still working. This guy likes his job.
- He has enough money that he doesn’t even need to withdraw anything to maintain his lifestyle. I would imagine he’s probably just trying preserve wealth as much as achieve growth.
- Since he’s the founder of Vanguard, he may have some sentimental or loyalty reasons to hold certain funds, and states as much.
I doubt many people reading this are in a similar situation 😉 Really, the only thing that I can take away from this is that there really is no “perfect” portfolio for everyone. But it certainly satisfied my curiosity; I wish more investment personalities would share their actual portfolios. You can see my imperfect portfolio here. I’m going to attempt to simplify it a bit sometime in the coming months as well.
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Hey – I’m in a similar situation. No, I’m not a bazillionaire financial genius. But I do own 3 of the 4 managed funds in my IRA that he does! Maybe I’m not as investment-clueless as I think? Or more likely, I’m that dart throwing monkey he’s trying not to get beat by.
The most revealing comment: “Since he?s the founder of Vanguard, he may have some sentimental or loyalty reasons to hold certain funds, and states as much.”
That is amazing. He admits to being irrational in his investing. That’s a relief! As long as those funds he’s holding aren’t losers, I guess that’s ok.
I get so many commenters telling me that I’m irrational in some of my investment choices or spending habits, but it’s human nature to be a little irrational on any subject.
Nothing wrong with the value side of the box, you have 3 of them in your portfolio! Curious to see what you learn on the bonds side of things. I do the 120-age thing so my bond holdings are too small to bother further diversifying, currently it’s just FGOVX – a middling government intermediate bond fund. Obviously as I get older the bond pie will eventually get big enough to consider different types of bonds.
I listened to an interview with Jack the other day on Fundadvice and I was surprised by his comments on international investing. He was telling the guys at Fundadvice they might have too large of a percentage in international, and there is risk that people are not taking into account. Overall though, he is still a guru, making investing easier for millions.
Yes, for one, he can be irrational since it won’t leave him in the poorhouse 🙂 Not that it will for you either.
Second, he’s investing in some of the lowest-cost actively managed funds available. It’s much more likely that these funds can make up an additional 0.2% a year in expenses than other funds with a 1.5% expense ratio.
Now that there are no low-balance fees at Vanguard with e-Statements, and that I am looking to increase my bond holdings (110-Age, likely), it may be worth splitting 50/50 or something between int/short index bonds and TIPS. Still not done reading up on it though.
Jonathan,
TIPS are a good option. I’m about your age and own them (though i don’t value tilt as much as you do. David Swenson (who manages Yale’s endowment) recommends them in his book on personal finance: Unconventional Success, you should check that book out. A little dry, but very informative.
Don’t overlook i-savings bonds either. The tax deferral on them is pretty nice as you don’t have to pay income taxes on the inflation adjustment that you need to do with TIPS at every adjustment.
I like him — he noticed the growth in equities portion of his portfolio and decided not to re-balance. I’ve been trying to come up with a good reason not to balance mine either — now I’ll just say I’m copying him 🙂
TK – Boggle has always been skittish on international investments. His thinking, which makes a lot of sense, is that most of the companies in the S&P 500 are already doing business internationally. I do believe, however, that the people at Vanguard had to literally do some arm twisting to get a little international exposure included in the Age-based and life strategy funds. On the other hand, the people at FundAdvice recommend 50% of equities go into international.
Me, a regular moron? I split the difference between the experts and keep 25-35% equities international.
I personally wonder how much recency plays a part in the debate. Internationals have been hot for a couple years with growth was ho-hum. 10 years ago they were getting slaughtered to US growth stocks.
Cool to hear how one of the long-timers is managing his money. Maybe as a “blogging king” you could convince him to start a blog and post “net worth updates” every month so we could track his progress month-to-month!
Actually Bogle does have a blog. Alas, no net worth updates 😉
I’ve been invested with Vanguard 30 years and managed to retire early as well (2000). As far as I’m concerned you can just look in the newspaper’s mutual fund section and in the section for Vanguard index funds… those are your choices. My only deviance from Bogle’s advice is I’ve never used bond funds. I’ve always used Treasury notes or bank CDs, rebalancing annually. Actually Bogle addresses this in his first book. Good fortune, Fred