YOUR MONEY-Me and My Money: Jack Bogle

By Chris Taylor
NEW YORK, Sept 11 (Reuters) - For a guy who helped create
the modern investment-management industry as the founder of
Vanguard Group, John "Jack" Bogle has an interesting
relationship with money: He hates to use it.
Bogle doesn't care for the fancy things people often buy,
and he sure doesn't like how it has corrupted the financial
system. He thinks that everyone should save for the future, of
course, but he can't stand to spend on himself. He is happiest
when he is at the family getaway in the Adirondacks with his
wife, six kids and 12 grandchildren.
Or at the office, where he still works at the age of 83.
Bogle's famously hard-working and thrifty outlook is present in
his new book "The Clash of the Cultures: Investment vs.
Speculation," a scathing indictment of an economy that serves to
enrich Wall Street types at the expense of Main Street
shareholders.
Bogle's own net worth is somewhere in the low eight figures,
he estimates. So what exactly does he do with it - and what
advice does he have for the rest of us? We sat down with him to
find out.

Q: Can we assume you're all in Vanguard funds?
A: One hundred percent. My personal, non-retirement accounts
are about 80 percent bonds and 20 percent stocks, reflecting my
old rule of thumb that your bond allocation should roughly equal
your age. It's spread across different bond funds, like the
Vanguard Intermediate-Term Tax-Exempt (VWITX). I'm a pretty
conservative guy.
My retirement accounts are more like a 50-50 split between
stocks and bonds, because of a longer time horizon and because
yields on bonds are extremely unattractive right now. The equity
side is mostly in Total Stock Market Index (VTSMX), but I still
have a little bit in the Wellington Fund (VWELX), which I've
been investing in for many decades. I don't ever want to sever
that relationship. Bonds in my retirement accounts are about 30
percent Treasuries and 70 percent investment-grade corporates,
like the Vanguard Intermediate-Term Corporate Bond Index
(VICBX).

Q: How about investments in other areas of your life, like
real estate?
A: My wife and I downsized our home in Bryn Mawr,
Pennsylvania, as we got older. About five years ago we moved
into a place that's about a third smaller and with much less
property. I didn't take out a mortgage for it because at this
point I don't have to borrow money, and I don't like to. We also
have what I call our "big old Adirondack barn," which is a place
that's been in my wife's family for more than 50 years. It's for
ourselves and our six children and our 12 grandchildren; it's a
nice refuge for them.

Q: Do you set a little aside for those grandkids in 529
college-savings plans? (Vanguard has about $40 billion in assets
in 27 state 529 plans.)
A: I don't really like the idea of tying up your money in
529 plans, because of all the restrictions on withdrawals. I'm
not against them, I just like having more flexibility than being
required to use those funds specifically for educational
purposes. We do save a little money for all my grandkids every
year, but we just chose the Vanguard Balanced Index Fund
(VBINX). It's about 60 percent stocks, 40 percent bonds, and
it's been wonderful. We give them what we can within annual
gift-tax limitations, and put it all into that very
tax-efficient fund.

Q: Have you had any medical expenses in recent years,
resulting from your health scares?
A: Thankfully, we have terrific health coverage here at
Vanguard, and I've definitely used it in my 83 years. Because of
my heart transplant 16 years ago and use of anti-rejection
drugs, they estimated about a 50 percent fatality rate. I've
been lucky enough to be in the good half. Anyone who's been
given an extra 16 years of life, there's no point in going
around bitching about anything.

Q: Where do you like to give back?
A: I tend to give to those who have helped me along the road
of life: Blair Academy, Princeton University, our church, and
several hospitals that got me here in one piece. On the
community side, I've always been a big supporter of the United
Way. The best rule for philanthropy is to give until it hurts,
as much as you can, because none of us can get through life all
by ourselves. As John Dunne wrote, 'No man is an island, entire
of itself.'

Q: Do you have any extravagances?
A: Every winter my wife and I take a week off and go to a
resort in Florida. But I really can't stand spending money on
myself. I don't like going into stores, I don't like the whole
process of buying things. I have everything I could possibly
need. I grew up in a certain way. My father's money vanished in
the Great Depression, and he had trouble keeping a job. So they
were tough times, and I started working when I was 10 years old,
delivering papers and eventually becoming a waiter. I learned
you work for what you get, and I feel sorry for people who
haven't had that upbringing.

Q: Any advice for people about where they should invest
going forward?
A: Stock returns basically come down to dividend yield plus
earnings growth. If you have a dividend yield of 2 percent, plus
earnings growth of 5 percent, I think a 7 percent annual gain is
a rational expectation for stocks.
I think it's unwise to get out of the stock market, or the
bond market, even though the economy is uncertain. The market is
often stupid, but you can't focus on that. Focus on the
underlying value of dividends and earnings.
Invest as efficiently as you can, using low-cost funds that
can be bought and held for a lifetime. Don't go chasing past
performance, but buy broad stock index and bond index funds,
with your bond percentage roughly equaling your age.
Most of all, you have to be disciplined and you have to
save, even if you hate our current financial system. Because if
you don't save, then you're guaranteed to end up with nothing.

(Edited by Jilian Mincer and John Wallace)