Vanguard founder Jack Bogle says he thinks stocks will outperform gold over the next decade. “I think so for a simple reason, and that is stocks have an internal rate of return,” Bogle tells Fox Business Network. He says that rate of return is about 7.5% — about 2.5% from dividend yield and 5% from earnings growth. Given that, and given that he thinks valuations are currently about fair, he says it’s reasonable that stocks will double over the next decade. Gold would have to climb to about $3,600 an ounce over the next decade to match that performance. “I think that’s a bad speculation. It could happen, but … I’m not going to be part of it,” Bogle says. He adds that while allocating a small part of your portfolio to gold is acceptable, “only a lunatic” would go 100% into gold. Bogle says all isn’t well with the economy, and that we could go through some rough economic times, but he also says investors should stick to a portfolio of stocks and bonds and stay disciplined over the long term.
In a second video, Bogle talks about market volatility, and how investors who are practicing asset allocation should handle their portfolio rebalancings.