Christine Benz: Investors who are using a strategic asset allocation plan and doing that rebalancing--if they are looking at their asset allocation right now, it probably calls for doing some rebalancing into bonds. Would you say: Just do it, just go ahead and buy bonds at this juncture, even though the prospects, as you say, aren't that exciting?
Jack Bogle: I am in a small minority on the idea of rebalancing. I don't think you need to do it. The data bear me out, because the higher-yielding asset is going to be stocks over the long term. That's the way the capital markets work. Not in every 10-year period, or even for that matter every 25-year period. But the higher-returning asset you're getting rid of to go into a lower-returning asset, so it dampens your returns, and the differences turn out to be, if you look at 25-year periods, very, very small. And sometimes rebalancing improves your returns. Sometimes it makes them worse.
Benz: It helps on the volatility front, generally, when you look at the data.
Bogle: Yes. There is a comfort level for an investor, and a feeling of he's kind of protected, as much as you can be protected in these volatile days. So it's a behavioral problem. Anybody that feels they should rebalance, I think they should rebalance. I wouldn't tell them not to. But I'd say, do it in a little more sensible way than it's done.
I wouldn't have some formula: oh my God, I've gone from 60% to 61%. I better get back to 60%. On a given day, that may happen in these markets. So it should be some range. Say you want to stay close to 65%. If you get below 60%, you can rebalance. If you get above 70%, you rebalance. And you try and not do it not with any great frequency.
Benz: So if you do it, set really wide bands …
Bogle: Wide bands. That's actually a decently wide band. And you can set it a little wider or a little narrower. But right down to the decimal point is just foolish, it's over-managing.