Bogle: Think Long Term — Very Long Term

Legendary Vanguard founder Jack Bogle says he’s cautious heading into 2012, and that investors need to take a long-term perspective.

“With the economy, I’m cautious,” Bogle recently told the Associated Press (a tip of the cap to NPR for highlighting the interview). “I don’t expect a boom in consumer spending over the next two or three years. People don’t have the wherewithal to spend a lot more, and in today’s world, they don’t have the confidence. Confidence can change overnight, but wherewithal cannot.”

“If you’re investing in stocks with idea of a one-year outcome, you should not invest,” Bogle adds. “You can lose a lot. If you invest in stocks with a five-year outlook, I would think it is highly debatable if you should do that. You have to think about more than just the probabilities of a market crash. You have to consider the consequences for your savings, and whether you’d be decimated.”

For bond investors, Bogle says that with interest rates and yields so low right now, “you just have to take those for what they are — a lot lower than what they have been historically.”

Bogle also discusses his belief that excessive trading is a big problem for the market, and that policies need to be enacted to tame the amount of speculation in the market. And he talks about his disenchantment with U.S. tax policy, saying that it’s an “absolute absurdity” that “gamblers on Wall Street” often pay less taxes on winning stock picks than American workers pay on their wages.