Bogle: Buy and Hold, Don't Trade ETFs
ETFs are one of the great marketing ideas of the recent era, but it remains to be seen if they're one of the great investment ideas, says the Vanguard founder and former chairman.
Christine Benz: I want to talk about traditional index funds versus ETFs. I know that you've been a skeptic and have talked about some of the very focused ETFs that have hit the market and what the investor returns will be on those investments. How are you feeling about the proliferation of ETFs and how the ETF industry has morphed over the past few years?
Jack Bogle: Well, the ETF has got to be one of the great marketing ideas of the recent era. I think it remains to be seen whether it's one of the great investment ideas of the recent era. The trading volumes are astonishing. Standard & Poor's 500 SPDR, the biggest one, turns over 10,000% a year, and I think 30% turnover is too high. What does one say about 10,000? Many of the emerging markets are up 2,000% or 3,000% a year, and many of the ETFs are in the 2,000% a year turnover rate, which means investors are buying them to speculate and of course they are sold on that basis. Now you can buy and sell at any minute of the day. You can trade the S&P 500 all day long in real time, if you're crazy enough to do that, which I wouldn't recommend for anybody.