Christine Benz: There has been a lot of money flowing to emerging-markets stocks over the past few years, as well. What's your take on that question? Does that make you nervous? Are you concerned that investors will be a day late and a dollar short in an asset class that has generated quite good returns?
Jack Bogle: It has generated good returns. That's a little bit like the bond syndrome, and that is, people are looking back to see what did well. That's what we call the Rowboat Syndrome. You are always looking back where you know where you've been, but you have no idea where you are going. There is a lot of logic how the emerging markets will grow over the next decade faster than U.S. markets.
I think, I guess, I'd say overall internationally--I don't happen to use international because I think the market is going to be an equalizer. And international and emerging markets will probably do more or less the same as the U.S. in the next 10 years. You don't know that, but if I were to put 20% in international, call half in developed markets and half in emerging markets, maybe I could add a percentage point if I did it for 20% of my portfolio. If they do 5% better, I am getting 1% of an extra return.
Well, I think, if you could just get out of your high-cost funds and into low-cost funds, you can pick up that 1 percentage point in a far easier way. So I could easily be wrong on that, but I think there are risks out there, unseen risks, currency risks, sovereign risks, and then the kind of risks that we have in international.
Each nation has its own kind of idiosyncrasies. Great Britain is in poorer shape than the U.S. Japan seems still to be in the same troubled shape it was in almost two decades ago now. They have never recovered from that big boom. So I'd say I don't do it. If you have to do it, limit international to 20% of your portfolio, maybe half in emerging markets and half in developed.