Some choice quotes from Mr. Bogle (in a 3 part interview):
I think most of them are silly. First they're faddish. When an alternative comes up as a diversifier, advisors say you need to diversity the different asset classes. But it's always the asset class that's done well recently. So gold is popular now. The problem with anything to do with commodities or gold is that they have no internal rate of return. What protects you from a bad judgment on an individual investment if your timing is bad in stocks or bonds is that in the long-term the income bails you out. Bonds are supported by the interest coupon. And stocks are supported by those growing dividend yields and earnings and will be for a long time I think. So what's the internal rate of return with gold? There is none.
What there is, however, is hope that you can sell it for more than you paid for. That's what we call rank speculation. So if you want to speculate on gold, be my guest. But understand that it's not really an investment. Real estate is supposed to be a separate asset class. It gets popular, the prices get bid up, without people realizing that real estate in securitized form is different from real estate itself. In other words, you buy an apartment building and collect rents and so on, and you're there. You're participating. But you put it in securitized form and the valuation of that apartment going up and down in value every day while the income stream remains the same to you.
http://www.mmexecutive.com/news/vanguar ... .html?pg=1
People will talk about tax efficiency as a reason for these ETFs but indexing is inherently tax efficient so they're low cost (no difference), they're tax efficient (no difference) and the third quoted advantage is the ability to trade all day long in real time. "Now you can trade the S&P 500 Index in real time" was the slogan in the newspapers for the first ETF. What kind of nut would do that?
http://www.mmexecutive.com/news/are-etf ... .html?pg=1
Picking stocks is a fool's game, not because there aren't going to be winners and losers but because people have to understand the market is a closed system. The average stock is going to be average and the average investor is going to be average no matter what you do. For investors saying they want to get into this fray and want to outthink, outperform, outguess, out-strategize their neighbors, some will and some won't. But I think that has much more to do with gambling than investing.
http://www.mmexecutive.com/news/what-va ... .html?pg=1
Q: Why are active managers convinced of their superior long-term performance, despite evidence to the contrary?
Well maybe they don't think about it. There’s a great quote from Upton Sinclair, which I’m paraphrasing: it’s amazing how difficult it is for a man to understand something if he's paid a small fortune not to understand.