Archives for November 2017

If you're a huge fan of making unreasonably large piles of money, like me, or a self-described "Boglehead," you'll know that the legendary investor John C. "Jack" Bogle, of Vanguard Group, recently released his expected returns forecast, with extensive commentary, for the next decade.

Bogle, of course, has been doing these forecasts and commentaries for years, and it has to be said that he's far more accurate than many financial crystal-ball-gazers out there. 

Here's his secret: Bogle takes the current dividend yield, factors in a growth estimate for earnings, and measures what he calls "speculative return."

If the price-to-earnings (P/E) ratio goes up, there's a positive expected return. On the other hand, if Bogle thinks the ratio will compress over the next decade, he'll call a negative speculative return that he subtracts from the earnings and dividend calculator.

It works pretty well. Now, he doesn't necessarily nail returns precisely to the last percentage point, but Bogle does have a knack for conveying the prevailing bullish or bearish conditions over the next decade.

But here's the thing: As much as I respect Bogle's experience and accurate track record, we've got a big difference of opinion.

You see, I think his return expectations, which I'll show you in a minute, are too low.

Essentially, Bogle and the "Boglehead" investors following along are settling for less – far less – than the unreasonable returns possible in a market like this.