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Rekenthaler Report

Jack Bogle's Great Insight

The quiet virtue of relative predictability.

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Promises Made, Promises Kept
"What's this?" Bogle will roar. "Only one great insight?" All right, fine. I will reword. Jack Bogle's least-appreciated great insight. 

Conventional risk statistics measure absolute predictability. Cash is regarded as the riskless investment because its price is completely predictable from one day to the next. One dollar today sells for one dollar tomorrow. (It could scarcely be otherwise.) In contrast, the price of a bond that fluctuates with changes in interest rates cannot be known in advance, and that of a stock that fluctuates widely is more uncertain yet. Stocks are absolutely less predictable than bonds, which are absolutely less predictable than cash. That is how risk is described.

John Rekenthaler has a position in the following securities mentioned above: VITSX. Find out about Morningstar’s editorial policies.

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