Bogle: Short-Term Investors Better Expect 'Unpleasantness'
Investors looking for quick gains are also looking for trouble even though markets will trend upward over the long term, Vanguard founder Jack Bogle told CNBC on Monday.
"I don't worry a lot about the year," the senior chairman of The Vanguard Group said on "Squawk on the Street."
"I try to look out a decade. If you're only in for a day or a week or a month, you're in for a lot of unpleasantness."
Bogle, who is known for his long-term investment strategy and bullish perspective on U.S. markets, said he sees earnings growth around 5 percent per year over the next decade alongside a 4-5 percent increase in nominal U.S. GDP.
With this expectation, Bogle expects an average of 7 percent returns in stocks per year over the next decade, but warned of at least a few "25-30 percent drops along the way, and maybe a 50 percent drop in the coming decade."
"The market is going to do what it wants," he said, "So you've just got to keep a stiff upper lip. I think the best strategy is to just do your best to avoid reacting, and it's hard to do. I have a hard time doing it myself."
Bogle pointed out that flows have been in favor of indexed funds versus actively managed funds over the last several years. "There is a lot of dissatisfaction with active management, and there should be," he said. "To the extent that we can take all of the 'phonyism' out of this and just get back to running sound, long-term, low cost, tax-efficient mutual funds—indexed or otherwise—that's the direction we should be going and it seems to be the direction we are going."
When asked about whether central banks pose risks to his bullish expectations, Bogle said that "if you're not concerned about it, you're not paying attention. We have an enormous fiscal problem around the world."
Compared to other central banks, Bogle said the Federal Reserve and Chairman Ben Bernanke have been "one of the best, if not the best" in the world with regard to their stimulation of the economy, compared to the austerity programs in Europe that are simply not working.
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