By Lee Brodie | CNBC – Mon, Aug 6, 2012
If you don't have money in the stock market (^GSPC) and you hope to retire someday, the founder of The Vanguard Group says you're making a big mistake.
John 'Jack' Bogle tells us if you're investing for the long-term don't get spooked by events of late. "Knight Capital is meaningless for anyone in the market for the long haul," he says. "In fact, you're probably in a mutual fund and you can pat yourself on the back for being smart."
In other words, for most individual investors the risk from Knight Capital is non-existent because most individuals hold a basket of stocks and the diversity of the basket hedges out the single stock risk.
And he takes issue with commentary from Bill Gross who believes "the cult of equity is dying."
"Like a once bright green aspen turning to subtle shades of yellow then red in the Colorado fall, investors' impressions of 'stocks for the long run' or any run have mellowed as well," Gross says.
The analogy of stock investing to autumn may be poetic, but it's not accurate and never will be, according to Bogle. "Equities offer higher risk and will therefore always generate higher reward," he argues. Therefore, "The cult of equity is never going to be over."
And he takes issue with commentary from Bill Gross who believes "the cult of equity is dying."
"Like a once bright green aspen turning to subtle shades of yellow then red in the Colorado fall, investors' impressions of 'stocks for the long run' or any run have mellowed as well," Gross says.
The analogy of stock investing to autumn may be poetic, but it's not accurate and never will be, according to Bogle. "Equities offer higher risk and will therefore always generate higher reward," he argues. Therefore, "The cult of equity is never going to be over."
Bogle goes on to remind us that in 1979 BusinessWeek made the same argument.
The article came out right before the beginning of one of the greatest bull markets of the 20thcentury, Bogle insists. "It's always a question of balance but anyone who is out of stocks right now is making a big mistake.
The article came out right before the beginning of one of the greatest bull markets of the 20thcentury, Bogle insists. "It's always a question of balance but anyone who is out of stocks right now is making a big mistake.
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