On the Money

Tips from Vanguard founder Jack Bogle for 'hazardous times'

Key Points
  • Jack Bogle advises investors to plan for the future assuming returns will be much lower than in the past.
  • These are hazardous times, he says, and investors should ignore their impulses.
Growing your nest egg
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Growing your nest egg

The stock market has risen sharply since President Donald Trump's election win in November, but can those returns continue?

"These are hazardous times. These are not cheap times. In the market, one never knows what is coming next,"said Jack Bogle, founder of The Vanguard Group.

In an interview with CNBC's "On The Money," the retired chief executive of the index-fund giant sees a change in returns for individual investors in the stock market.

"The first thing they should do is plan for the future on the assumption that returns will be much lower than they have been in the past," Bogle advised.

He said since the long bull market began in 1982, investors have seen a nominal average return of 12 percent, minus a 4 percent inflation rate, for an 8 percent real return.

Today, Bogle says "we're looking for a 4 percent nominal return and one and a half to 2 percent inflation, for a 1.5 to percent real return on your savings. That's a big, big difference."

Despite the prediction of a lower return on the horizon, Bogle stressed: "There is never an argument for not investing."

"I've never been in favor of wholesale changes, like getting out of the market, or getting out of the bond market for that matter, but do something on the edges."

Should you make some adjustments to your retirement nest egg?

"It's a question of a decent asset allocation, which in this day and age, in this current market is not so easy to puzzle through," Bogle says.

He advised a 50-50 blend of stock and bonds for "all investors of all types." But he argued that if you're younger, an allocation of 80 percent stocks and 20 percent bonds might be a reasonable mix. And "when you're older, depending on circumstances, 40 percent or 30 percent in stocks and 70 percent in bonds. "

"I happen to be in the middle of that," Bogle told CNBC, adding "I'm at 50-50."

Bogle created Vanguard with the first low-cost index mutual fund in 1975 and today the investment management company has more than 4 trillion dollars in assets.

Still, Bogle admits "I have my own concerns and worry. I don't have all the answers. Half the time, I wonder why I have so much in stocks and other times I wonder why I have so little. So, I'm probably about right."

Bogle shared his message for retirement investors: Own the stock market and diversify, buy in at low-cost, invest for the long term and don't trade.

"I think in general the best rule is 'stay the course,'" he said.

The investor has another rule, "when you get your retirement plan statement every month, don't open it. Don't peek. When you retire, open the statement and believe me if you've been putting money in there for 40 or 50 years, you'll need a cardiologist standing by you when you open it."

"Time is your friend and impulse is your enemy. It's the market return that's going to be your best investment for a lifetime."

"On the Money" airs on CNBC Saturday at 5:30 a.m., ET, or check listings for air times in local markets.