Bogle Says Prepare for Stocks, Bonds to Miss Historical Returns

  • Stock returns may average 4% to 5% over next decade, he says
  • He advises accepting market return, even if not very palatable

John Bogle, the founder of Vanguard Group Inc., said investors should prepare for weaker results than stock and bond markets generated during his six-plus decades in money management.

The average annual return has been around 12 percent for stocks and 5 percent for bonds during his career, Bogle, 87, said Wednesday in an interview with Bloomberg Radio.

“That is not going to be true in the future,” he said. “It’s reasonable to think that stocks might return 4 to 5 percent in the next decade.” A bond portfolio, including corporate debt, could produce a yield of about 2.5 percent, he said.

The S&P 500 Index returned about 2.6 percent this year through Tuesday and 1.4 percent in 2015. And central bank policies to stoke economic growth have depressed bond yields. Bogle, who advocates a buy-and-hold approach to minimize costs, said it would be a mistake to pursue more aggressive approaches to try to beat benchmarks.

“So it’s ‘accept the returns offered by the market, and don’t take risks to get higher returns, whether you’re talking about bonds or stocks,”’ he said. “And that’s not a very palatable thing.”

Vanguard managed more than $3.5 trillion globally as of April 30, the most recent figures available. Investors added an estimated $218 billion to its mutual and exchange-traded funds in the 12 months through April, according to Morningstar.

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