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Stocks Are Still the Best Place to Invest: Jack Bogle


Despite downward pressure today, stocks could still recoup last week's losses and post a 7th directional swing in the past 8 weeks. Since August 8th, every rally has been sold, every valley has been bought, and not many expect this to change. It's enough to drive you mad, and even exit the market, but legendary investor Jack Bogle, founder of the Vanguard Group says turning your back on stocks now would be a mistake.

''They're not cheap but they are still the place to invest,'' Bogle says. On a price-to-earnings ratio, the market is currently "a little above average," and on a dividend yield basis (currently about 2.5% for the S&P 500), Bogle says "they are way below average" of about 4.5%.

However, when compared to bonds, stocks look cheap. Bogle believes stocks will outperform bonds over the next year, but with a lower rate of return than many investors have come to expect. With lower returns ahead of us and a "lost decade" behind us, the temptation to trade or time the market is great.

"That's the silliest kind of thing to try to do," says the father of the index fund. "The odds are just terrible and the process is costly. You end up paying those croupiers on Wall Street money every time you turn around."

Bogle says it is simply too difficult to know what is going to happen in the markets and it also requires you to be right a lot. "Trading and speculating is in fact a losers game by mathematical certainty," he says.

Instead, he falls back on often forgotten truisms. "When somebody's pouring money into stocks, somebody else is taking money out of stocks, dollar for dollar. If you're smarter than the market, more power to you. But I don't think anybody is."