Over the last few weeks, there were some opposing views about index investing written in the Globe and Mail. In a column entitled Can a Boglehead Approach to Investing Work? the following was written:
“Those who like the idea of simply owning index funds because of the low cost need to be cautious, says Vancouver’s Lori Pinkowski, portfolio manager and senior vice-president, private client group, at Raymond James-Pinkowski-Allen Financial Group. “They are like any other investment and need to be actively managed,” Ms. Pinkowski says. “For example, if you bought a US Equity index in 2000 it would have taken you almost 13 years to make any money on it. I can’t imagine investors would be happy with that.”
No money made over 13 years in U.S. equities? Is that the power and returns that comes with indexing?
“Bogleheads” take their name from Vanguard Group founder John Bogle who favours a low-cost, simplified approach to investing using products that track the index instead of trying to beat it. Surely the columnist knows better than to pick-and-choose time windows to isolate investment returns, since any window selected can be spun to tell a different return story.
Indexers who own products like VTI:US, one of the ETFs I wrote about on my blog recently, would be encouraged to know this ETF actually returned over 8% for the last ten years, if you pick and choose another investment window. See for yourself here.
Thankfully, Preet Banerjee stepped up to defend the index investing approach recently writing the “Boglehead” investment philosophy goes beyond using just indexed products; investors are encouraged to spend within their means, save early and often, diversify, minimize their taxes and stick to a long-term investing plan regardless of market conditions.
With many investing articles, there is usually another side to the story so be careful when you read any article touting the high (or low) returns of any investment product. The investment window you choose can often tell a very different tale. If you remember that, you’ll see beyond “expert” product opinions and discover being a “Boglehead” is definitely a good thing for most of us.