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Avoiding Stocks Is a Big Mistake: Jack Bogle

Monday, 6 Aug 2012 | 2:25 PM ET

If you don’t have money in the stock market and you hope to retire someday, the founder of The Vanguard Group says you’re making a big mistake.

John ‘Jack’ Bogle tells us if you’re investing for the long-term don’t get spooked by events of late. “Knight Capital is meaningless for anyone in the market for the long haul,” he says. "In fact, you're probably in a mutual fund and you can pat yourself on the back for being smart."

In other words, for most individual investors the risk from Knight Capital is non-existent because most individuals hold a basket of stocks and the diversity of the basket hedges out the single stock risk.

And he takes issue with commentary fromBill Gross who believes “the cult of equity is dying.”

"Like a once bright green aspen turning to subtle shades of yellow then red in the Colorado fall, investors’ impressions of 'stocks for the long run' or any run have mellowed as well," Gross says.

Bogle: We've Created a 'Frankenstein' of Trading
John Bogle, Vanguard founder & former CEO, says that the Knight mistake is a result of the short-term trading culture, calling it a "Frankenstein" monster of trading.

The analogy of stock investing to autumn may be poetic, but it's not accurate and never will be, according to Bogle. “Equities offer higher risk and will therefore always generate higher reward,” he argues. Therefore, “The cult of equity is never going to be over.”

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Bogle goes on to remind us that in 1979 BusinessWeek made the same argument. (Click here to go to “The Death of Equities” – Businessweek August 13, 1979)

The article came out right before the beginning of one of the greatest bull market’s of the 20th century, Bogle insists. “It’s always a question of balance but anyone who is out of stocks right now is making a big mistake.

What do you think? We want to know!


Posted by CNBC's Lee Brodie

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Trader disclosure: On August 6, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Joe Terranova is long SEPT. MINI S&P FUTURES; Joe Terranova is long VRTS; Joe Terranova is long MCD; Joe Terranova is long USB; Joe Terranova is long GS; Joe Terranova is long JPM; Joe Terranova is long YHOO; Joe Terranova is long SBUX; Joe Terranova is long WFM; Joe Terranova is long AAPL; Joe Terranova is long EMC; Joe Terranova is long NXPIZ; Stephanie Link is long AAPL; Stephanie Link is long MCD; Stephanie Link is long DIS; Stephanie Link is long SLB; Stephanie Link is long LRCX; Steve Grasso is long ASTM; Steve Grasso is long BA; Steve Grasso is long D; Steve Grasso is long FRO; Steve Grasso is long LNG; Steve Grasso is long MHY; Steve Grasso is long MO; Steve Grasso is long NVIV; Steve Grasso is long PFE; Steve Grasso is long S; Steve Grasso is long XLU; Jon Najarian is long call spreads in GMCR; Jon Najarian is long call spreads in OCN; Jon Najarian is long call spreads in SBUX; Jon Najarian is long call spreads in YELP; Jon Najarian is long call spreads in MON; Jon Najarian is long put spreads in HPQ; Jon Najarian is long put spreads in KCG; Jon Najarian is long CME; Jon Najarian is long CBOE; Jon Najarian is long CIGX; Jon Najarian is long GLUU

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