Wise words from the conscience of Wallstreet, John Bogle, founder of Vanguard Mutual Funds.
Q: What’s your investment outlook heading into 2012?
A: If you’re investing in stocks with idea of a one-year outcome, you should not invest. 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.
With the economy, I’m cautious. 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.
via Bogle: Boost taxes on Wall Street ‘gamblers’ – USATODAY.com.
Bogle may underestimate the risks of stock investing in general, but in this interview he gets at a leading cause of the market’s instability–speculation–which he labels correctly as gambling.
The tax incentives are all wrong (as were other government incentives). The governments should tax speculation/gambling at a higher rate than investing. It’s pretty simple. If the price to gamble has a cost, less of it will go on. Which hopfully would also dull the impact of gambling/speculation on commodity prices, helping those prices fall in line with “real” value.
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The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition)
(1976)