Economics, Videos

Why Jack Bogle Only Owns -U.S. Stocks

Concerns about higher risks and the global footprint of U.S. firms have led the Vanguard founder to his 0% non-U.S. stocks allocation.

non-U.S. stock

Why Jack Bogle Doesn’t Own Non-U.S. Stocks

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Transcript

Let's talk about international and you and I always talk about this you're kind of a contrarian even within your firm in terms of thinking that investors don't necessarily need international stocks to have a globally diversified portfolio but you yesterday at the conference you talked about Chase's Zweig's good piece on that perhaps relative undervaluation of foreign stocks. Do you think investors ought to look at that be thinking about the fact that we have not seen foreign stocks perform as well as us.

I guess the answer to that is yes and no. And number one the fact that they're undervalued may mean that they're undervalued because they're riskier which I think is at least importantly the case maybe not the entire arc is second I'm just a great believer in aU.S. portfolio because we are the most entrepreneurial nation. We've got the soundest institutions financial and otherwise or have had in the past. Governments it's pretty solid in the past at least. And a welder versus hot economy. So and for US corporations about half of their revenues and half of their earnings come from abroad anyway. It's not as if we're America first or America only the entire world economy is integrated around. Many many countries trading with many many other countries. So I do not think you need an international. People have been doing that for a long time.

The cash flows in the fund both have been much stronger in the national debt than the U.S. despite the inferior performance. And I don't quite understand where this thing is you that you must have a global portfolio. Maybe maybe it's right of course maybe anything's right. But I think the argument favors the domestic U.S. portfolio and they have to worry about the dollar as strong or weak. One more risk or many of these foreign nations have critically emerging market nations which are I think around 20 percent of the non-U.S. stocks are very risky very interest rate sensitive. Governmentally not person not strong or maybe a little capable of tipping over other like. So I do tell people feel free to disagree with me because I'm not always right but if you if you know I have zero percent in on us I say you should. You don't need to have on us. But if you do limit it to 20 percent a lot of portfolios now 25 35 45 percent in non-U.S. stocks. And I think that's just too much.