What can we learn from the Bogleheads?

In response to the continued discussion on the Bogleheads forum asking, “Why Does Anyone Listen to Paul Merriman?" Paul takes this opportunity to "share a wonderful teaching moment" from the comments of those who follow the work of John Bogle. Particularly, Paul considers the criticisms leveled against him regarding the recent performance of small-cap value funds, which he has been recommending for almost 30 years. While some Bogleheads counter that recommendation based on short-term returns, Paul reminds listeners even the idea of investing in any kind of common stock was once considered very unpopular. He cites Edgar Lawrence Smith’s best selling book, Common Stocks as Long Term Investments (1924), which promoted the then-surprising idea that stocks excel bonds over the long-term.

Notes from This Podcast:

Here is a link to the introduction from Edgar Lawrence Smith’s best seller, Common Stocks as Long Term Investments. Copyright 1928 (originally published 1924)

Smith highlights the belief that bonds were chosen as a better solution than stocks.  Stocks were seen only as a speculation and Bonds as an investment.  Bonds were seen as the best choice for the long term and many large investment accounts did not include any stocks. I imagine those investors were as sure in their belief in bonds as the Bogleheads who disagree with SCV are in theirs.

During the podcast Paul references Table 4 from the 90 Years study, Table 3a from the study comparing 11 portfolios including the Bogleheads, and the new Lifetime Investment Calculator .