One of the real highlights of our annual conference is that the Bogleheads get a chance to have their questions answered directly by Vanguard founder Jack Bogle. This year's moderator of the Q&A with Jack is a retired Mobil Oil Corporation human resource executive. He discovered the Bogleheads in 2001 and he and his wife Patty attended their first Bogleheads conference in Denver in 2004.

They've both been active in the Bogleheads community since that time. They live in the Northern Virginia area and started the Washington, D.C. area Bogleheads local chapter. Please welcome my good friend and conference teammate, Ed Rager. Please give another very warm welcome to our very special guest of honor, Mr.

Jack Bogle. Now, without further ado, let's get started with the Q&A. Take it in. Just let me say one quick thing. I spoke at the NASD, I had a big, long speech, NASD, National Association of Security Dealers, in Washington about a decade ago, and when I was introduced, they gave me a standing ovation.

I looked at the audience and said, "Why didn't you say that until after I spoke?" We know this crowd loves you, and that's why we're here. So you'll probably get another one before the day's out. Okay, so I've got a number of questions, and we'll get to as many of them as we can.

This first one is from an attendee named Fred Beery. He says, "The market has been up for years, and I have gained more than I expected. In setting up a donor-advisor fund for charitable giving over the next, say, 10 years, what allocation would you suggest between U.S. equities, bonds, dare I ask international, to maximize the returns for the charities I give to?" Well, first of all, if you're going to have a balanced program, which is what you laid out there, you're not going to maximize your return.

The best way to maximize your return is to, in the long run, maybe not from here, is to buy the S&P 500 and leverage it. You don't want to do that. It's a prudent thing, so the real question is not to get maximum returns, but what is the best way to get prudent returns?

I would stick with the balanced index fund formula of 60% stocks and 40% bonds, and maybe for a program like this, 65%, but you really can't make an argument over 65 or 60, because nobody knows, and God knows Bogle doesn't know. So should international non-U.S. be in that 60%, I don't think you need it, and I don't think the rest of the world will do as well as the U.S., but I'm wrong so often in my new book.

I spend more time talking about the things I did wrong than the things I did right. So it's a matter of judgment, and I'd say maybe to honor the principle, let's call it Taylor's principle of three-fund portfolio, you might have 10% to 20% of the stock position. No more than that in non-U.S.

stocks. Okay, thank you. This next one is from Adam Manwaran. Since attending the Bogle Heads Conference for the first time last year, I've been quickly moving my asset allocation toward Taylor Laramore's three-fund portfolio. Recently, I've been lured into the Vanguard Active Alpha Seeking ETFs. After rereading your article on reversion to the mean, am I just chasing my tail with that active ETF bet?

Yes. I think that answer is fairly clear. So Adam, listen up. This next one is from Trey Parrish. As a retiree in mid-retirement, given your lower projections for stock market returns over the next 10 years, should I reduce my stock exposure in my portfolio since CD rates are rising and becoming more attractive, and how can I determine the appropriate stock allocation?

Well, you know, I've said before this is a really hard time to invest. I would say as a general principle, with a stock market at these levels, it is probably a good idea to, as Baron Rothschild said, to sell to the sleeping point, to sell stocks where you're not worried about it.

Maybe a 10% percentage point reduction in the stock position, maybe not. What makes this time so different is that bond yields are so low, and they're going up admittedly, the treasury is up to, I think someone said 3.2%, 25-year treasury, 30-year treasury, and the stock market is 1.8, so you get a higher yield, but these are not really super yields.

And so it's really not a question, an easy question to answer, because it depends not only on your ability to withstand a market decline, your financial ability, but on your emotional ability to withstand a market decline. So you're asking me to do not only a financial analysis, but a psychological analysis, which I'm not prepared to do on the information contained in one or two sentences.

But I would say the biggest mistake investors make is when they think the market is high. They get out. They go zero. That is the dumbest thing you can possibly do, because there's no certainty in this. So in my book, which I think, since I've signed so many, I don't feel badly about blacking it a little bit, The Little Book of Common Sense Investing, and I say never have less than 25% of inequities, and never more.

There are exceptions to both of those, but I would kind of stick to that. Just make sure you've got a decent position. And I would think today would probably be a time to make a very, if this is the way the investor feels, this makes you more comfortable, makes you sleep better, to do some kind of a 5 or 10 percentage point reduction.

So if he's at 65%, to go to 60 or 55. But there's no-- I don't know how to get across. People ask me these kinds of questions all the time. There's no certainty about this. You could be so terribly wrong that you don't want to do anything too big.

But in general, I'd say if you're at 60, 40-- and I happen to be 50/50 myself. I told you that yesterday. And I spent half my time wondering why I have so much in stocks, and the other half wondering why I have so little. The investor's dilemma, I think I call it.

But it gets to-- presumably, the financial ability to withstand risk is there, and the emotional ability there. You have to-- the investor has to ask for himself. But if you're really bothered, really scared, do something. I mean, life is too short. But are there precise answers to the question?

No. There aren't precise answers to anything in the field of investing. OK. This is from Duncan Rankin. If all of your portfolio is inside Roth IRAs, is it better to use Taylor's three-fund portfolio or use an equivalent target date or life strategy fund? Nobody knows. Nobody knows. You know, the target date is an interesting kind of an idea.

Your equities go down as your age goes up. Your bonds go up as your age goes up. And Taylor's three-fund portfolio is presumably a buy and hold. And that could easily do better, but could easily do worse. There's just no way that I could think of a balanced portfolio in any event.

And there's no way that I could predict which will do better. But if it were me-- we are a funny, funny crowd, these investors, we investors. I would do the simple portfolio rather than the complex portfolio. Now that means you don't have as much fun game-playing. It's kind of boring to have all your money in the balanced index fund.

What do you do? You don't look at it once a year, maybe, and take it from there. So there's just kind of, as the old saying goes, how many angels can dance on the head of a pin? And that's how much you should have in one or the other.

I just can't answer the question. This is from Merrill Moore. What is the single best piece of advice or lesson that you want to pass on to your heirs? I'm thinking. Well, that's a very hard question, because getting-- when you get into-- I presume investment advice or not. Just say a single best piece of advice or lesson.

Well, obviously, the best single advice is never lose your humanity. Be a good human being. Now presumably, this is actually aimed at an investment-- what do you do about investing? And a single word I'd say, minimize costs. And start early. That's the second piece of advice. And never stop your regular investment program, no matter whether times are good or bad.

I mentioned low cost. Be diversified. And now I've gone over the single best piece of advice. It all counts. This is from Dion Stams. I like the statement that, quote, "In theory, practice and theory are the same. But in practice, they are not," end of quote. Do you have advice for us managing our portfolios on the difference between theory and practice?

Well, let me say a couple of things about that. I read a lot of the Financial Analyst's Journal articles, and a lot of the Journal of Portfolio Management articles. And I can understand about 15% to 20% of them. They've got all these Greek formulas, and they make things very complicated.

And they're looking backward always. So they're doing a lot of data mining. If you look backward and see something that doesn't work, throw it in the ash can and find something that does work. And believe me, if you do enough data mining, you can find a lot of things that work in the past, that have worked in the past, I should say.

So a lot of the theory out there, I think, is cast in a very misleading and foolish light. It doesn't allow for cost. It doesn't talk about what strategies you should have, what you should do with that. And there's this backtesting, as it's called, that leaves me dubious about theory.

Indeed, I wonder if anybody who writes these academic theory articles has ever followed his own advice. Think about that. And so, practice, I would favor over theory. But if you want to tell me that theory, gross return minus cost equals net return, I would follow that. Is that a formula?

Is that a theory? Is that a practice? It's certainly a practice, and it's certainly a theory, too. There's this old saying about, if it works in practice, why the heck doesn't it work in theory? An interesting question. I think there's much too much, much too much, kind of the search for the holy grail in investing, the search for the consistently market-beating formula, without the knowledge that, as far as I know, in human history, the holy grail does not exist.

So you don't want to spend an awful lot more time looking for it. Okay. Next, from Nuolf, I put my glasses on, Nuolf Fellenbaum, I'm sorry for the name-pronouncing. At what age did you introduce your kids to financial literacy concepts, and what methods did you find most effective? Well, I did it very differently.

First, you can't answer that question very well, because all kids are different, and I'll give you an example of that. My oldest son happens to be a hedge fund manager, I mean a market-neutral hedge fund manager. He does very well for his clients and himself, unbelievably, because his fees are very low.

He was kind of restless and not fun, and not getting much interest. This is when he was, say, 16, and not getting much interest in the world. So I said, "Why don't you take a look at the stock market, John, and I'll pick out a couple of stocks for you.

You can pick out a couple of stocks that you like, and follow them and see what happens. We aren't going to buy them, just put them on paper." So he picked out about four stocks, and I didn't know how successful that advice was until I went into his bedroom one evening, and there they were all on little letters on his lampshade.

So it was a way to get somebody interested in investing, and I detest these contests that schools and colleges have among kids to see who can pick the best portfolio and all that, because it suggests that that's the way you should invest, but that's just a game. It doesn't have anything to do with real investing.

So at what age is a kid able enough, and all children are going to be different, able enough to understand the essential message that I give? And I should tell you that for 25 years, so let's use that one, probably the oldest child, well, the children probably, they're now in their, well, two of them at their 60th birthday.

God, am I that old? So probably when they got into their early 20s, late teens, I told them I was going to put some money away for them every year, and I was going to put it in Vanguard, Balanced Index Fund, and that's a, and part of it's an administrative convenience.

You know, I've got six kids, 12 grandchildren, how many great-grandchildren, I guess six great-grandchildren, is that right, Mike? I told you I relied on Mike for a lot. And so probably in their late teens or 20s, I told them what I was going to do was put it in a Balanced Index Fund, told them what that meant, wouldn't go up as much as the market, but it wouldn't go down, and you didn't have to worry about it.

And then every once in a while a news clipping would come along, and I used one of them in my book, Little Book of Common Sense Investing, it showed how well a balanced fund had done, Balanced Index Fund, which isn't very sensational at all, but it had beaten the college endowment funds, I think it's very close to the chart that Gus Sorter showed you a little while ago.

And so I said to Ian, just don't do anything, I put it away, it's in trust, they won't get it for, I guess like work, I can't remember, no, they don't even get it then, then their parents become the trustees, and then they can draw a capital, if they want to buy a new house or something like that, or put a down payment down on it.

But you would be amazed at, I won't give you the numbers, but putting a large kind of gift that I can afford to do, every year, year after year, for 25 years, my, these damn kids are rich! And I don't give them valuations, I don't talk about it, I want them to make their own way in financial life, and when I cork, they're going to be very, very happy grandchildren, but I won't be there to hear the laughter, I guess, I'm not sure.

Steve Floyd wants to know if the U.S. stock market suddenly went into an unexpected broad market decline of greater than 25% and still heading south, what would you tell us to help us stay the course? Well, the first thing I'd say was, who the heck knows whether it's still heading south?

It may have stopped going down at 25%, and a lot of them do stop at the 20-25% range, but you know, it's an opportunity to buy more, and certainly, you know, there are a lot of funny ways, it's very hard to give advice on these kind of things, but the one piece of advice I would categorically give to everybody, for God's sake, don't stop a program of regular investing because the market goes down, you're killing the whole value of dollar cost averaging, and it may go down for a few more years, who really knows, but so much the better when you're putting money in every month, because it will come back, I think we're in a little dangerous territory now, as I tell people, and 25% drop, 35% drop, it's easily possible, it's always possible, just because markets are markets, so I think the questioner is right to say, you know, what should I do, and I guess the answer generally is, don't do something, just stand there.

>> This is from Kathleen Ryan, what was the best advice you received from each of your parents? >> That was a long time ago, you know, I should remember, but I, you know, they always wanted me to do what was right, and we placed high value on telling the truth, which would be kind of an integrity thing, we were taught to behave like honorable human beings, but I can't remember any specific piece of advice that we got.

>> Well I would think that everyone in this room and around the world would agree that you've done every one of those things. >> I hope so, I try my best. >> Yvette Sirlucho, again, forgive me on the pronunciation, what are your thoughts on ways a new retiree can protect their portfolio from inflation?

>> Well, protecting yourself from inflation in the stock market is a very difficult thing, there is very little correlation over, even over intermediate term periods, with stock prices and inflation. There is a direct correlation, a very high correlation, between dividend payments and inflation, and those lines almost overlap each other, curiously enough, I think I had one of those charts in that ancient Princeton thesis, but dividends are highly correlated, and I think we should spend more time thinking about dividends rather than market values, because market values are all over the place, and dividends are pretty reliable to go up a little bit each year, like inflation is.

And now, someone mentioned the other day, I think it was Jonathan, maybe, that in 19, what was that year, 1979 or 80, dividends went down 22% on the S&P 500, that's an extraordinary event. It was the biggest decline in dividends since 1929-1933, so it just doesn't happen over and over again.

And in that case, what was most extraordinary about it, it didn't reflect a general drop in dividends, it reflected the elimination of dividends by almost all the banks. They had to stop paying their dividends, so I wouldn't give that much credence. I think dividends are fairly secure, and you should be worried not about the value of your estate, but about the income-producing capacity of your estate or your retirement plan, because that's where you go out, once a month you go out to the mailbox and get your mutual fund dividends and your Social Security check, and then you come home and have a nice dinner, live in a nice house, whatever else you want to do.

So we should focus, I really believe this so strongly, we should focus more on the inherent value of our investment program than on the market value, because markets are crazy things, and that's what makes investing so difficult, and if you want to look at it that way, so much fun.

This is from John Allen, "I would like to know more about you as an individual. What do you like to do that is not related to investing, and what places do you and your family find most enjoyable to visit?" Well, I hate those questions, because I'm in fact kind of a jerk, and that is, I have gotten so wrapped up in my career and my crusade and my mission that I am not nearly as well-balanced a human being as I should be.

I try and read three or four good books a year, when someone that has a good education, which I certainly got, should be reading a dozen books a year. I do read the New Yorker, that's my one claim to omniscient, omnibus kind of reading. It's a great magazine, greatly written, and great subject matter, you just can't beat it.

But a few books a year, and I'm talking about good books, I sometimes throw out a junk book. I read The Woman in the Window, that popular book a few years ago. I'm still not quite sure what happened at the end, but of course now I'm not the man I used to be, and don't say, "No, you never were." But I can't do much in the way I used to play a lot of tennis, squash, had to pick up golf after I had my first heart attack, which was when I was 31 years old, I guess that was 1960, and so I had to give up the racquet sports, and then I finally found a doctor who said, "Get back to racquet sports," which was nice, although it turned out to be something I shouldn't be doing with my peculiar form of heart disease.

I actually collapsed once on a squash court and died, and my opponent didn't know what to do. You may have heard this story, ran to the locker room, the guy said, "Call for help, Mr. Fogel is down, I think he's dead," and the guy said, "Well, yeah, we don't really have a system for that." And so the guy came back and went, "Clunk, clunk, clunk," that's already good in my heart, and that turns out to be quite a brilliant thing to do, particularly in that case, because it actually started.

When the emergency people got there, they said, "Do you think you need to go to a hospital? You can't make this stuff up, right, Mike?" And I said, "Yeah, probably a good idea." So I can't do the athletic things, I have a lot, you can see it here, I can't do even much walking now, I'm very shaky in my balance, I'm taking some physical therapy, I hope it will get better, but time is not on my side.

But I think my kids would tell you I've been a good father, and you can be a good father in my fashion by, I always thought my job was not to lecture the kids, but to show them how I behaved. So they weren't saying when something happened, "You told us not to do that, daddy." We don't get much of that because I tried to live to the standards that I would have lectured them on.

And so we're close in a lot of ways, children, grandchildren, I'm a very happy, nicest thing for a family is to have the cousins all interact together, and we don't do that 100%, we do it a very high percentage, we all get together and have great times as a family.

So I don't feel too guilty. But the prime reason I was able to be a less than perfect father, I don't know how to explain this, but you get consumed with a mission, and you also get a reputation. And sometimes I think half of my life is spent trying to live up to my reputation, and this I think is not uncommon at all.

It's sort of like Adam Smith's Invisible Spectator, is it Invisible? Impartial Spectator, thank you, I depend on him for everything. Impartial Spectator, you read about that in some of my works, and you'll read a little bit about it in my new book. But I have a fantastic wife, she was a great mother, is a great mother, great grandmother.

She's a complete workhorse, and now she has, she's about five years younger than I am, and now she has the task of taking care of this poor doddering old fool. And it's hard for me to get around the house even, so she really steps up to the plate and does that too.

One more task, she's in charge of me and the dogs. So I don't mean to make this too apologetic, there's an old saying, if you had to do over again would you do it differently? No, why the hell would I do it differently? I'm happy with what I've done, in a small way proud of what I've done, and a lot of it's because of people like you in this room.

People have been helped by my simple ideas, and I'd say my high moral values. You mentioned your book, there was a question, we're eager to read your new book, is it coming out in November? I think so, it's really funny, if you can stand a little by play here, Mike has been the lead horse in trying to get all the proofs done and all that.

We got the final proofs and I looked at them over the weekend, a couple of weeks ago, and we only had four days to look at them. I decided that chapter 17 should not be chapter 17, it should be three different chapters, 17, 18 and 19. So I separated the three, rewrote the third, and brought it in on Monday morning, and I thought Michael was going to faint, and I thought the editor of Wiley was going to die, so I turned that over to Mike to deal with it.

It's a better book because of it, but it didn't hold up the publication, the reason I mention it here. So it should be out around November 15th, the note on Amazon says November 29th, that's a special distribution problem for Amazon. I read you that part that I like so much, you, me and the universe, I'm sorry, the universe, you and me, no, it was you, me and the universe, got my alphabet wrong, wonder why, so there's a lot of moralizing in it, and increasingly I find that life is kind of simple, draw on your humanity, try and get the hell out of this world as a decent human being, and you've been lucky in your education, in your family, the family that I grew up with and the family that I have now, and have also had a career that's amounted to more than nothing.

I don't know, I shouldn't be satisfied, and I will never be totally satisfied, but I feel pretty good about my life so far, so far. Okay, Bob Ronan wants to know, "Do you think bobbleheads are too thrifty so that they end up leaving too much money for someone else to spend?

Should we splurge a little more?" Say that once again, I missed the middle. Do you think we end up leaving too much money for someone else to spend? Should we splurge a little bit more? Well you asked that question of the cheapest guy in the United States. I hate shopping, I don't even go into a store, I get most of my stuff, including everything I'm wearing at this moment, from L.L.

Bean, because they have like a little catalog, and you just check off a few things, or call them by phone, and they send them to you, it's kind of wonderful, and they're not very expensive, but everything, I mean, I give a what, I don't know if I really should say this, but I will tell you it's the truth, I might take a couple of families out to dinner, and I get worried about the bill, do you really have to have steak, what's the matter with chicken?

No, I don't say that, but I think that. You really need a salad course, you have a nice big dinner, what's this about dessert? And yeah, I can give a very large donation to a charity, and not even think about it, not even think about it, so that's kind of weird, but it's a lot more fun to give away to people that have less than you do, than getting accustomed to a high way of living, going out for dinner, for example.

We like to sort of, although we have this nice place in Lake Placid, very nice, we've been there for 50 years now, and bought by my wife's parents, and if I ever say to the kids up there, would you like to go out to dinner tonight, they always say, it's nicer than it is here, and we don't go out for dinner, and no place on earth nicer than that.

We also had multiple questions from people out on the Boglehead website that weren't able to attend, and I thought I wanted to mix some of those into the questions as well. Start off with one, what major changes or trends do you foresee coming in the next decade or two?

Well, I'll give you, with reasonable brevity, the three that I write out of the book. Chapter 17 is now part two, with three chapters, and the part three of the book is called The Future of Investment Management, and the three chapters are, number one, the mutualization of the mutual fund industry, and there's no way that at some point other firms will adopt the Vanguard shareholder first strategy.

They may not want to, but when costs get driven down and up, when the directors wake up to paying huge fees for bad performance, it will finally happen, and I do tell the story in there of my two big attempts to mutualize. I tried to try to mutualize Putnam, and I tried to mutualize a subsidiary of IBM that ran their money, and in both cases, I failed, but on the other hand, you're not out until you have three strikes, and that's only two.

So I believe that the industry will be forced economically to run itself for the fund shareholders and not for management shareholders. That's number one. Number two is the fight to save the S&P 500 index. There are all kinds of forces against it, and it's, in a sense, its own worst enemy.

It's so successful that assets are concentrated, and the index funds own very large portions of every company in America and pretty much around the world, and for U.S. companies, Vanguard owns, I think, around 8%, BlackRock owns almost 8%, that's 16, I think I used these numbers earlier, and State Street about 4%, just those index funds, and that's 20%, and if you throw in American funds, they probably own 3%, and then you go way down from there.

But the concentration of governing power, the first issue is the number of competitors, like should you own all seven airlines, and a very serious attempt to say that no mutual fund index or otherwise, but it applies mainly to the index fund, can own more than one company in a given industry.

I talked about this briefly the other day, and that is a fight that somebody better be making. I'm doing it now myself to say it, because I think by commons agreement, the S&P 500 index fund that we started in 1975 was the greatest advance for serving investors in the history of finance.

It seems a little broad, but nobody else can think of any other, and so we cannot let that go, but there may be things that have to happen, because the other part of the problem, and that is concentration of voting power, and there's an article by Dr. John Coates, professor of Harvard Law School, who says, "Do we really want a country where 12 people, 12 individuals control the entire corporate America?" I think he's wrong.

It's more like 6 that are going to end up here, not 12, and he says 12 is just a number he picked out of the air, but a very small number of individuals, the chief executives of big money management firms, are going to be able to run corporate America unless something changes.

Something will change. There will be change in governing responsibilities, maybe change in the law. Right now it says that no mutual fund can own more than 10% of any security, voting stock of any company, but it only applies to the mutual fund, not to the complex, so it eats the law very easy to get around, which gets me to the third part of the third issue, which is what I call in the book the Investment Company, the Financial Institutions Act of 2030, a number picked out of the air, and that is the Investment Company Act is written basically to regulate closed-end investment companies, and it doesn't regulate institutional investors.

It regulates mutual funds in incremental ways. Mutual funds were never the focus of that act, so they were things that were designed for sort of Procrustean bed, things that were designed for closed-end funds were applied to open-end funds, and it also relates to this litany of problems. It relates to a mutual fund.

Well, this isn't a mutual fund, because it was in 1940. Most people had just one fund, and now people have a lot of funds. The regulatory unit should be the mutual fund complex or the management company and not the mutual fund itself, in my opinion, so that will be a big change.

It's going to happen. All these things are going to happen, and I can't tell you why. I can't tell you how, and I certainly can't tell you when, but I can guarantee you, you younger people in the room who will be here to see it, mark my words. Okay.

Thank you. Jack, do you think the market has become more efficient than it was 10 or 20 years ago or less efficient? I believe the market is precisely as efficient as it was 70 years ago, and I picked that 70 years for a reason, and that is I showed the one in my proposal to start an index fund.

I showed directors that the performance of the average mutual fund, they were all large cap funds then compared to the S&P 500, and the mutual fund lost for the S&P 500 won by 1.6% a year. The article I wrote, which I mentioned to the Financial Analyst Journal about index funds, I brought it up to date to the previous 35 years to 2015 probably, and the gap was exactly the same, 1.6 percentage points.

That may be just a happy accident that they're exactly the same number, but it suggests that whatever efficiencies there were then, there are now. Whatever management ability was able to overcome it now, it's the same as it was then. There's no evidence that this institutional market of today is much different than the individual-dominated market of the '30s and '40s and '50s.

Why would there be a difference when all these institutions are just composed of human beings and they want to do better than one another, and whether they're human beings or institutions or real human beings, the market is going to be quite efficient, but never perfectly efficient. This is true for the whole every year of the past 70 years and even before that.

The efficient market hypothesis is right some of the time and wrong some of the time, which I think means it's a lousy hypothesis. I don't see any evidence that the market is less efficient or more efficient now. None. Did I make my position clear? If you could travel back in time to give some advice to the 21-year-old Jack Bogle, what would it be?

Get into the mutual fund business as soon as you get out of college. Yesterday you mentioned China rising. Could you please talk more about this? Well, I'm not an expert on China, but what we see out there is continued population growth, continued substantial GDP growth, which ran up in the 11 or 12 percent annual GDP growth for a while, and now it's down to, I believe, 6 or 7 percent.

Very healthy growth continually. I think those numbers are about right. I see a more enlightened, in some ways, Chinese government that's prepared to let entrepreneurship play its own role, let business play its own role. What could get in the way? Those are things. They basically have a stronger base, economic base, population base, than the U.S., and they will gradually catch up and pass us.

I don't think there's really any question about that. They have dragging down a tremendous amount of regulation and, what do I want to say, maybe mind control. You really have to sign on to the Chinese Communist Party if you want to get anywhere, one party, and they're giving that a certain amount of continuity by having a leader who, I think they suspended the rules, that the leaders change every six years, to give them lifetime.

Then I heard some of them taking it away, so I'm not sure exactly where we are on that. It's a very regimented society, a very debt-ridden society. They have big economic issues and a lot of building that goes on with huge debt, and nobody moves into the buildings. This is a problem that we face in America from time to time, and it seems to be a serious problem.

Probably the most serious problem is what do we know about China, and that is we don't know a heck of a lot. They guard their information. They would give you misinformation if they could, and they do give you some misinformation, but sooner or later, when you're playing with a half a dozen or a half a hundred different economic indicators, it'll be pretty clear which ones have been fussed with and which ones have not.

So I think they're coming around a little bit, but I think they're powerful potential short-term problems and a real risk to world stability. Do you like Vanguard's target retirement funds, and would you recommend them to most investors for their tax-advantaged accounts? Well, take the easy part. If you want a target date retirement fund, I would lean strongly in favor of Vanguard's.

Why? Because our costs are a fraction -- you knew this was coming -- a fraction of what the others are charging. It's a curious paradox. I believe, and I've said this before and I'll say it again, I believe 40% of the equity position outside the U.S. is not the right thing to do, and to do it, I think if you're not sure, non-U.S.

will do better than U.S. Give people a choice. Say we're going to start a whole series of international target date funds. God knows we've got enough funds already, another 15 or 20 of them won't matter, 12 of them, I guess, and you decide instead of just saying, "Here's what we're doing," in a notice that nobody read, because people don't read notices.

That said, we are not particularly out of line compared to the other target date funds. T. Rowe Price, American Funds, I guess are the next two competitors, and they have heavy international components. I'm not sure it's 40%, maybe a little more, maybe a little less, but we're all following pretty much the same strategy.

What this makes me reflect on is from the very beginning, I thought the best strategy for investors and for Vanguard, the firm, was to have funds with relative predictability. You are never way out of line with your competitors, and you will win on cost if you really are right in line with your competitors.

If you look at a fund like Windsor and look at other large-cap value funds, say, and this is maybe not the best example in the world, you're going to find a 99% correlation between our returns, and if you have a 1.5% cost advantage, when you take a lower turnover, lower expense ratio, and no sales load, the 1.5% is easy, it's probably too conservative.

You'll win by 20% over 10 years, probably 20% over 10 years. If 20% doing 20% better than the average fund isn't good enough for you, I don't know how to help you, honestly, and you don't get money pouring in at the top when your performance is great. I mean, just think about Magellan, the Magellan Fund, Fidelity Magellan, had this great performance, the money poured in, it got to $110 billion, paying the Johnson family a couple of billion a year.

I don't think they need it that badly, but then they do if they're going to cut their prices on their index funds to zero, couldn't resist that, and then it stopped doing well, and now Magellan Fund is, I think, $9 billion, about right, Mike, $12? Okay, let's call it $10 billion.

You could have just said yes. You know, Mike is such a treasure, I've got to say that again. We had such a great time together, and he and I, he takes that in the same sense of humor that I offered it out, but that's $100 billion that's left Magellan Fund, probably more than that, because the market has been going up during this period, even though their performance has been bad, $100 billion worth of disappointed investors.

No wonder Fidelity is thinking more about indexing, and so the idea of being really good must come with the knowledge, certain, that when you're really good in some periods, you're going to be really bad in others. That's the way of the markets. So that's a terrible strategy, because the money comes in, as I said, high, and then when you let the investor down, it goes out, and you've got a dissatisfied investor, and probably a dissatisfied general public who knows your company.

So that has worked out well with index funds, there are other funds that have, I've talked about this before, high relative predictability. And so, to focus this particular point on Ed's question, is this relative predictability for our target date funds relative to our competitors, who all have heavy international positions, or is it relative to a simple U.S.

stock/bond position? Our investors are going to relate to that. A lot depends on how international does, international I should say, not U.S., and the fact that I wouldn't do it, wouldn't have done it, or wouldn't have done it to such extent, really means nothing, because I'm often wrong, if never in doubt, just that.

And there's also no magic in a target date fund, I mean, it all looks so simple, but it isn't. There will be periods when you'd be better off having a very high percentage in bonds when you're starting off, and a very high percentage in stocks when you're finishing. I mean, that's just the way the market is, you just don't know it.

It's so logical and sensible, and so smart as a way to think about things, but I think not maybe, I wonder at the end of the trail, whether the target date fund won't prove to have been offered kind of as a panacea, and the investment business, and the mutual fund business, there are no panaceas, let me assure you of that, a lifetime of learning, no panaceas.

Okay, the next question is, "What are your proudest accomplishments?" Well, I think I said this the other day, quoting Sophocles, did I tell you Sophocles? Well, if you don't remember, I guess I didn't tell you, or maybe you weren't paying attention. Oh, we were paying attention. But he said, "One must wait until the evening to enjoy the splendor of the day," and so you're asking me, in effect, how do I feel about the splendor of the day, what's my biggest accomplishment?

But my evening isn't here yet, so I'm going to wait until, I call it a day in this business, and I don't know when that will be, I'm going to hang on as long as I can, I will, as you'll see in the book, I will keep right on to the end of the road, and though your day be long, let your heart be strong, keep right on to the end, if you're tired and weary, still carry on till you come to your happy abode, and all you've loved and been waiting for will be there at the end of the road, period.

Very nice. Next question is, "What strategies would you use to avoid the sequence of return risk?" There's no way to avoid the sequence of returns. There is one thing that I would advise everybody, which is at least tangentially related to this, and that is when you look at a fund's record, look at this, I mentioned this the other day in connection with the international and the growth in value, put a dollar in the fund, and put a dollar in the market, and accumulate those dollars each year, and then do a one-into-one chart, so you're not looking at a single unit, like the 10-year, 20-year, 30-year performance, you're looking at how it was achieved, and if you see this at the beginning, you'll see it jump right out at you.

Probably somebody started a fund with $100,000 and put a whole lot of new issues in it, and got way ahead and stayed ahead, fell back from that high, but is still way ahead at the end of the game. The market is going to do what the market does when the market does, and sometimes rationally, and sometimes irrationally.

The reality is, and again, coming back to my idea about dividends, and this is a slightly different one, the market is a terrible thing to think about, because it has this speculative element in it, which means sometimes it's selling too cheap, and sometimes it's selling too dear. What we do know, know, know, is that ultimately, the return on the stock market, S&P 500, matches the fundamental return of the S&P 500, the dividends, yields, plus the earnings growth it has.

Speculation goes, that extra speculation, but you always come back, sooner or later, it may take a while, to the fundamental return that is the return created by business, and that is dividends and earnings growth. We can look at the market today and say, "It doesn't look so good," and using that particular formula, or that particular concept, you're probably right, but it could be ...

I didn't say when on any of these things, and it could be a few years, I don't think much more than that, before the market comes down to its speculative, its fundamental value, but right now it's higher, and we know that, but nobody knows when, so you want to be very careful about doing anything about it.

What happens is people look at it now and say it's going to go down to its ... probably take about a 25% drop or something, to get to its normalized value, fundamental value, value of the earnings and dividends, and someone looks at it, "Well, I'm going to get out now," and then a month passes, and two months passes, and three months pass, and a year, two years, and five years, and somewhere along the way the investor says, "I was wrong, so I'm going to go back in." That's usually the time to get out, so if someone ...

the market is the market. It's based on opinions of people who are smart and people who are dumb, of institutions that were smart and institutions that were dumb, of investors who are lucky and investors who are unlucky, and they all come out as a group with the market return, and there's just no predicting the sequence that I know of, and if there were, we wouldn't all be gathered here.

There wouldn't be anything to do. The answers would be easy, but the answers in the market are never easy, and it's very frustrating. Two-part question, what is the best and worst personal financial decision you've made in your life? Well, that's it. I confess that when I got out of college and started to make a little more than my initial pay of $250 a month, and I was able to save a little, I did some investing in individual stock, and they all had great stories, and none of them panned out, and when I had a little more money, and I'm not talking about big league money here at all, I had a broker, a friend of mine from Smith Morning, and he liked to call me up and tell me to get out of this and into that, and it wasn't the fact that every single time I should have got into that and out of that, which is the way the world works, but it was the damn phone calls.

I was wasting my time talking to a stockbroker when I had much better things to do in the office yet, so the biggest mistake I was was letting that go on too long, which is probably 10 years. I do own some equities now, always have, and basically dominated by, I've been director of any number of companies, maybe five, and I've gotten option stock from each of those, and so I've kept those stocks that I've accumulated there and not sold them, but other than that, I really have very little to do.

I did, let me just full disclosure, being full disclosure, I did, to show my confidence in my son's small cap growth fund, I made a pretty decent investment, and it's really done well, and I think you could say, Ed, that is it really a mistake? A mistake is something you learn from with a small amount of money.

It's probably the most brilliant thing that ever happened to you, so that would be it. I didn't get the religion adequately. Well, the final question that I have, Jack, is would you please run for president? There's an old joke about a, it's a Boston joke about a guy's little lisp, and I won't bother you with the whole joke, but his answer was, "I won't say yet, and I won't say no, but I will say that that's the best over I've had today." All right, we can open up to the audience if anybody else has any additional questions.

We've got a few more minutes. Hold on until we get a mic back to you. Jack, thank you so much. Yesterday we had a great time at Vanguard, and so impressive. I think everyone agrees. Everybody's been talking about it, and the crew members in particular are what make this place so impressive, and they talked again and again about how much they love working at Vanguard and how much they love you as the founder.

Could you share, because many of the people here work in business or business leaders, how you were able to start that culture that lives on today? Well, that's really a nice question, because it comes a little bit out of what the events that transpired in my book, and that is, I think I started to say this to you yesterday, and it was originally about landmarks.

Each step along the way that got Vanguard from a little skeleton company, the biggest company in the world. I never ran 12 of them, and I read the book, and I thought it was a stinking book. But instead of throwing it away, I added a chapter about human beings, and it's called Caring the Founder's Legacy.

In that I tell the story of when we were probably around, let me just say, 200 crew members. We started with 28. It occurred to me that we should have a personnel function. It's called HR today, human relations. And we were not about, in those days, oh, no, we're not about to hire anybody.

We didn't have any money to hire anybody. So I decided to get an individual in the company to be the head of personnel. Her name was Eleanor St. Graft. She worked in the legal department. I cleared it with her boss, said, "You should do it." I came in and said, I tell the story in the book, I say, "Eleanor, we want to start a personnel kind of function.

Your boss tells me that you would be good at it and could do it, and would you be willing to do that?" "Whatever you want, Mr. Vogel." This was not, in those days, an answer I got with some frequency. And I don't get quite that much anymore. Uh-oh, I shouldn't have said that.

And so I said, "Well, that's great. Thank you." And she goes out the door, and then she comes back in, and she says, "I want to do whatever you want me to do, Mr. Vogel, but what is it you want me to do?" And I said, "Well, you know, that's a really good question, and I haven't thought much about what I want you to do.

So let me try this. I want you to hire nice people, and make sure they hire nice people." And out she went and did that. So the key is to have people that have at least a touch of niceness, of human goodness, and even more than that. And yes, you have to have people with no technology, particularly in today.

That wasn't much at the time, and so you need the technical, which requires very brilliant people. But even then, you should try and get people who are at least fun to be around, who are committed to the company, committed to their jobs, committed to their fellow crew members. You know, it's amazing how many of these people—I mean, I talk to a lot of 25th anniversaries, retirements, Award for Excellence winners.

I'm still spending a lot of time, which I love, talking to individual crew members or groups of crew members. What do we call those things, Mike? I do team meetings. Team meetings. I do probably three team meetings a week where somebody finds that they want to bring their investment team or whatever team it is in to see me, or they get a bigger room and maybe as many as 20 people.

And just I talk to them about anything they want to talk about. But I think, to the extent, Patti, that what you're saying is a valid reflection. I think never underrate the power of trying to be a decent human being. And it's really easy. You know, don't lord it over people.

Don't yell at people. I don't usually—Mike's laughing, I never do, really, almost never, hardly ever. And for me, the standard is, really, you build up a reputation for being a decent human being. There's a lot of admiration, even love, from our crew members. And we human beings then try to live up to that reputation.

So it's constantly—I mean, I'm making bigger demands of myself every day because the reputation grows. But I think it's just trying to be a decent human being who cares about other human beings, whether they're crew members or, for that matter, whether they're all the people sitting here in this room.

And if you like other people, I'm not a big political guy at all. I'm not a big handshaker at all. I'm very introverted. But I enjoy the company of people that share my values, particularly within the company. And if you can build that kind of a culture—and I never did it, like, consciously.

I never thought I have to build a culture. I did what seemed like a natural thing to do, hire people, be nice people, give them good compensation, have them figure out what it is to do. And a lot of them work on the same teams, have worked on the same teams for 25 years.

And I really like that. They get along well. They come to work. They're happy to go to work on Monday. And sometimes, even, they had to leave on Friday. So it comes down to, as human beings, if we want to do what's right for ourselves and for society, just try and be good to the people around you and make sure that they pick that up from you.

It's very easy, because they see what happens. And have them handle other people, higher or lower in the pecking order, with humility and respect and confidence and trust. And you know, I haven't really tried to explain that before, Patty, but that's the best I can do at the moment.

Can I add something to that? As a firsthand witness, when we had our first conference with Jack in 2000 in Miami, I was a snowbird, and Jack knew that I had a business in this area. And he invited me to join him when I came back for lunch, which I did.

And Jack's office is, what, a block or so from the galley. And as we were walking across from Jack's office to the galley, we had 12,000 employees at that time. Something like that. He seems like he knew everyone as we were walking. He was approachable. He seemed to know their names.

He asked how Mary was, or how Joe was. And when we got to the galley, there is no executive dining room. Absolutely not. Jack finds an empty table with all of the other employees and sits there. And I think that is exactly what we're talking about, what you're talking about, Patty.

And can I add one little thing? Jack talked about how frugal he was. In the galley, you go through the buffet, through the line, and you pick out your lunch. And we were going to have a salad, and Jack told me to get the lightest plate you could find because they charge by the pound.

I had to throw that in. Tell me this is actually true. Jack, thanks for everything you've been doing and being such a great man. I'm nervous to ask this question to you. Here's a quote I'm going to have. You said, "I said, 'Stay the course' a thousand times, and I meant it every time.

It's the most important single piece of investment wisdom I can give to you." Of course, you've written the book, "Stay the Course." But around the year 2000, I think you cut back your equity investments from 70%, 80% to 20%, 30%, something like that. And you said that in extreme valuations, people should consider similar actions.

So at that time, the stocks were up 40 times earnings and yielding about 1%, and bond yields were at 7%. My question is, what measures of extreme valuations should we make to change the course or change our investments? And how am I supposed to know? A layman like me, how am I supposed to know that?

It's not easy to know. Those opportunities don't come along very often. What happened in 2000 was something I don't know that ever particularly happened before. The yield on the stock market cut to 1%, and that's not a sustainable stock market level at 1%. Japan got to 1%, Japan got a half to 1%.

But dividend yield is a very important point, a very important point in my reasoning. So here we have the stock market looking high, and the yield in the bond market was 7%. So that meant you doubled your money in 10 years in bonds. And you could double your money or triple your money in stocks from 1%, but it just didn't seem like a good idea.

So I can't remember exactly what I did, but I think I cut back from around 75% in the stock to around 50%. Very unusual, something I would probably advise people not to do. It worked well, of course, and I don't want to get too much sentiment into this, but don't forget I had gone through little bits of hell, health-wise, and my heart was not working well.

I wanted to make sure that if I departed this orb that my portfolio was fairly conservative for my family. And so I even, I was having an ablation, which is a long process where they run stuff into your heart to try and get it beating properly. It took 10 hours.

Before I called my lawyer from the operating room and said, "Could you please get down to me? You never sent me the things I should sign to change my will the way I did the other day, and I want to sign them before I get this procedure done." So down she came, and I signed them, and so there is the subtle pressure of an uncertain life that has dictated more of my investment changes than you might think.

And that's probably stupid, but it is understandable, because you're thinking about those that are coming behind you. Anybody else? While we wait, as I walk over there, I'll tell you a story I haven't told everybody here before. An airline pilot flying from one place to another, I don't know where it was, Florida, got off the trip.

The flight attendant is, "We're organizing everybody to get on the van to go somewhere." And he goes, "Yeah, some guy was in a coach seat, was sitting in the back of the galley, and he was giving me investment advice." And I said, "Oh, no, it's a stockbroker, insurance salesman, or somebody like that." He says, "Yeah, give me his card." And he pulled it out, and it said, "John C.

Boll on it." So I'm thinking about, now, how do I get that card, or should I tell him who it is? So anyway, I said, "Hey, if you don't want that card, you know, I'll go ahead and take it." And I took it, and then I told him who it was.

But on the back of it was life strategy, moderate growth. He was advising a flight attendant in the back of the airplane. So that's a story I've never told that here before. That's probably what we call apocryphal. - Jack, I have a question for you. All of us have been following your mission.

We've been trying to get it out to more and more people. We've been following it ourselves. Are we doing the right thing? Is this what you want us to do as Bogleheads? If you could elaborate to all of us, if you were going to give us a mission, what would it be?

- Well, you know, that's a hard question to answer, because I think it's unwise for anyone here, including me, to give anybody real advice, because we don't know what's going to happen. And you're judging the questioner, the person asking the question or asking the advice. You don't understand who that person is, how could you possibly do that?

So I like the idea of the Bogleheads Forum, where all ideas can be integrated and people that disagree can do this and that. So I think it's participating in a group exercise, and I must say I'm astonished and delighted with the success of the Bogleheads website, and investors love it.

They love Taylor's book, and they love my books, too, which are pretty much the same as Taylor's, except longer. And so I think your mission is to do what's right for yourself, and if someone comes to you in need, just give them a course that goes down the middle with the knowledge, knowledge, always the knowledge certain, that you don't know what--nobody knows what lies ahead.

What worries me about this 25-year, 45-year bull market, which Vanguard has existed, 12% return. It's not going to happen again, I don't believe, and I think there's too much--too many people believe that the past is prologue, the future will continue to get these high returns. But think about that chart I showed you yesterday, showing the difference between a 4% return on stocks and a 12% return, where your money doubles in the 12% return every six years and a 4% return every 18 years, and look at those lines spread apart.

Don't expect it to happen again. Underplay, always underplay, the chance to make big money. Investing is a matter of putting to work money with corporations, and I have a lot of worries about our corporations today. So I say this advisedly, I just don't know what else to do. I worry about the merger trend somebody has, about the shrinkage of companies in the U.S.

Bill Bernstein did yesterday, and that's a serious problem, not a major serious problem, but a serious problem. And so the future is always uncertain. So whatever you--I guess I would like to sum up by saying, whatever you say to anybody about anything at any time, just make sure to say, "But nobody really knows," or "Investing is really a hard business," because our emotions get mixed up with our reality, with our mathematics, the dollars we have in our retirement plans, and I think you should not be quite blunt about it.

Try to give investment advice to anybody else without those hedging words. - Okay, here's a chance to talk to your financial hero, or a financial hero--let me make my way to the front. - First, I wanted to thank Mike for being such a great help to Jack and to all of us.

- Jack, you mentioned that you read a couple good books a year. Which of the recent good books would you recommend to us? - Well, I'm right in the middle of a biography of Andrew Jackson by John Meacham called American Lion, and I don't get a chance to catch up with it very long.

And the last really great book I read was--I'm not talking about the last book, the last really sensational book--was Doris Kearns Goodwin's Theodore Roosevelt, William Howard Taft, and the New Age of Journalism. And it's a compelling book, but particularly--a little disclaimer here--particularly for me, because I studied and wrote a paper about the New Age of Journalism back at the turn of the century.

Ida Tarbell, and I can't remember the name of the magazine that printed all this stuff. But journalism was active then, and people listened to journalism then. And they had a powerful role in the public. And so that combination of two really interesting characters--I mean, there's nobody more interesting, I don't think, than Theodore Roosevelt--just meant for a very compelling read.

And I like biographies, but I wouldn't know where to begin. And people send me books all the time, investment books, and I'm asked to endorse them. And I got one the other day, and I decided I'd give it a shot. I won't mention the name of the author. And I got to about page 150, and it was 550 pages.

So I wrote back to him and told him my rule. I never endorse a book without reading it. And I was sorry. He just wrote too big a book for me to read. He didn't seem very happy. I also warned him, by the way, that my endorsement has never been known--my blurb--has never been known to add a single copy of Extra Sales, not one book, ever.

>> Got one on the other side. And also on the personal touch, after we finished the conference last year, I got home and received a note from Jack himself. Very impressive. You talk about the personal touch. Jack, we know how much you enjoy eating peanut butter and jelly sandwiches.

And other than whatever's on sale, what is your favorite kind of jelly? >> Grape. >> Well, I think that wraps up the Q&A. On that note, is Jason going to put that in the journal? >> Yeah. >> Okay. Thanks. >> I was just going to ask you, Jack, as a new father, and with our second child on the way, my wife graciously allowed us to call him Jack, call him Little Jack.

This is Big Jack, as he's referred to. But I just wanted to ask if you could give us a little advice on--especially as a father, but you had six kids of your own, and you elaborated the relationship that you have with them. That's not something that happens by accident.

You have to be an intentional parent. And you don't really see that in society, but in talking with many of you as a first-time attendee, that's something that's pervasive, and my compliments to all of you and to you, Jack. But if you could just give the next generation of parents your advice, and what worked for you in developing that relationship with your kids?

>> Well, I've already told you I was an imperfect parent, so I don't know that I'm a good person to answer that. I mean, I'd say, as I do in so many ways, the simple things that matter, Ben. First, love the child, no matter good or bad. Two, set an example.

Don't have to explain yourself away. Three, be prepared for some real bumps along the way, because almost every child has them, particularly as teenagers. And four, when it comes to time to drive a car, don't let them. >> Well, Jack, the Bogo Heads appreciate your--every year, attending and being and sharing your time with us, we cherish your friendship.

Every year, we look for some meaningful gift to commemorate your appearance here. And it gets tougher and tougher. I know you don't have any room. Just to tell the tale, when I was in Jack's office a few years ago, he had honorary doctorate degrees on the floor, so I know you don't have a lot of room.

But this year, from the American Revolutionary War Museum, I think we found something that's meaningful and small. This is a letter opener in the shape of an American Revolutionary War sword. And the inscription reads, "To Jack Bogo, who revolutionized the mutual fund industry by slashing costs, saving investors billions, the 2018 Bogo Heads Conference." >> Thank you all.

You make me happier than ever that I was able to make it and be with you today. And the one thing I want to say, of course, it's a highlight of all your admiration and good words and good wishes and selfies and signed books and standing ovations. All that means a tremendous amount to me.

But what means the most to me, at least it's on my mind now, is one of you came up to me and said, I think one of the visitors for the first time, "What a wonderful group of human beings you are." They came here, they felt comfortable, they felt welcomed, they felt part of the group, they felt there was an openness, everybody was treated as equals.

And I think that is an incredible tribute to all of you in this Bogo Heads crowd. And that's what really life is all about. So it's a wonderful moment I'm looking out there and thinking, wow, what a nice group. So until next year, God bless you all.