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Bogle Skeptical of Credit-Sensitive Bonds, Smart Beta

The Vanguard founder is leery of the diversifying qualities of currently popular fixed-income investments and says smart beta strategies are "silly."

Christine Benz: One area that investors seem to be really flocking to in the fixed-income space is the more credit-sensitive bond types, such as bank loans, emerging-markets bond, and high-yield to some extent. I'd like your take on that phenomenon, and are investors perhaps giving their portfolios more equity sensitivity by adding to some of these exposures.

John Bogle: I am a real skeptic. We get these ideas of diversifiers that will diversify your portfolio further if you go into emerging-markets bonds. Emerging-markets government bonds, I guess, are the big thing, or international bonds. I remain from Missouri on that. Anything that is in the public eye and the people say, "Here is a diversifier," that's usually done well. Nobody used gold as a diversifier when it was doing badly.