Many people over the years have asked Jack Bogle about his portfolio, hoping to divine the perfect investment mix. It's an especially pressing question now in a volatile market, in which international events are whipsawing stocks.
The founder of Vanguard Group, the world's largest mutual fund company, used to have a really basic portfolio that followed an asset allocation known as the 60-40 rule — 60 percent in a U.S. stock index fund and 40 percent in a U.S. bond index fund. He maintained that allocation for himself for years.
But he recently shifted his strategy by a hair: He's now at 50/50, which makes his portfolio slightly more conservative.
"I just like the idea of having an anchor to the windward," said Bogle, who is 86. "I'm not so much worried about having my estate grow."
The most obvious and important characteristic of what Bogle suggests is his advice to mirror the market through an index strategy instead of trying to beat the market. Research has borne out what looked controversial in 1974, when Bogle founded Vanguard.
"When you step back and look in aggregate, passive funds are winning by the cost of the fees," said John Rekenthaler, Chicago-based Morningstar's director of research. "This is Bogle's promise delivered."
The difference isn't huge — in most categories, passively managed funds outperformed by between 0.5 percent and a little over 1 percent — but it's clear. For instance, there were 562 actively managed funds in the U.S. large-growth category and 25 passively managed funds. In the 10 years leading up to Dec. 31, 2014, passively managed funds' asset-weighted return was an average 9.27 percent versus actively managed funds' 8.05 percent, according to Morningstar.